Chapter 2: Q16 (page 44)
What is the difference between a positive and a normative statement?
Positive Statements show actual situation. Normative Statements show how the situation should be.
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During the Second World War, Germany’s
factories were decimated. It also suffered many human
casualties, both soldiers and civilians. How did the war
affect Germany’s production possibilities curve?
Suppose Alphonso’s town raised the price of bus tickets to \(1 per trip (while the price of burgers stayed at \)2 and his budget remained $10 per week.) Draw Alphonso’s new budget constraint. What happens to the opportunity cost of bus tickets?
Why is a production possibilities frontier typically drawn as a curve, rather than a straight line?
Explain why societies cannot make a choice above their production possibilities frontier and should not make a choice below it.
Return to the example in Figure 2.4. Suppose there is an improvement in medical technology that enables more healthcare with the same amount of resources. How would this affect the production possibilities curve and, in
particular, how would it affect the opportunity cost of education?
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