Why does scarcity lead to the "what," "how," and "for whom" questions?
What will be an ideal response?
Human wants exceed the resources available to satisfy them, thereby creating the problem of scarcity of goods and services. Everyone wants more than he or she can have, be it a student dreaming of a faster computer or an extraordinarily rich business leader wishing for more vacation time. Because not all wants can be satisfied, people must make choices about which wants to satisfy. The choices resulting from scarcity mean that people must decide what gets produced, how are the products produced, and for whom are the products produced.
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Refer to Table 11-9. Clock It To Me manufactures clock radios. The table above shows estimates of fixed cost per period and average variable cost for three possible plant sizes
a. You are employed as the company's cost accountant and have been asked to prepare cost estimates for various output levels for each of the three possible plant sizes. Record your calculations in the table below. Average Cost of Production 5,000 Clock Radios 8,000 Clock Radios 20,000 Clock Radios Small plant Medium plant Large plant b. For each of the three output levels, which plant size will generate the lowest average total cost of production? c. Suppose the firm currently sells 8,000 clock radios per period (using the optimal plant size for this output level). Now, however, it has just secured a long-term contract to supply 20,000 clock radios per period. In the short run, what is the average total cost of producing 20,000 clock radios? Provide a numerical value based on your answer in part a. d. What happens to average total cost of production in the long run? Provide a numerical value based on your answer in part a.
Why is economic development a contentious subject? Use one of the controversies mentioned in the chapter to illustrate why people may not agree on the answers
What will be an ideal response?