Microeconomics and Profit Maximization
Added on 2020-03-04
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Running head: ECONOMIC ASSIGNMENTEconomic AssignmentName of the StudentName of the UniversityAuthor note
1ECONOMIC ASSIGNMENTTable of ContentsAnswer 1..........................................................................................................................................2Answer 2..........................................................................................................................................4Answer 3..........................................................................................................................................7Answer 4..........................................................................................................................................8Answer 5........................................................................................................................................10References......................................................................................................................................12
2ECONOMIC ASSIGNMENTAnswer 1a)Production Possibility Curve (PPC) that captures output capacity of the nation is usuallyconcave in shape. The curve is drawn taken the axiom possible combination of output devotingall the resources of the country. The amount of resources in an economy is constant. Therefore,the country cannot produce unlimited quantity all goods. In fact, increase in output of any onecommodity involves the choice of sacrificing other commodity (Nicholson & Snyder, 2014).This is termed as opportunity cost associated with the production choice. Now more the countryproduce one good the more it needs to sacrifice other commodities. The presence of increasingopportunity cost make the PPC bowed outward. On a straight line, the opportunity cost remainsconstant, which is not actually the case.Figure 1: Production possibility Curve of a nation
3ECONOMIC ASSIGNMENT(Source: as created by Author)The above figure describes the production possibility frontier of a nation assuming theeconomy produces only two goods X and Y. Increase in production of X from X* to X**involves decrease in consumption of Y from Y* to Y**.b) The basic problem of the economy is limited means and unlimited wants. This creates scarcityproblem in the economy (Krosch & Amodio, 2014). People always have to sacrifice somechoice to opt some their choice. It is not about the problem of a single economic agent. Rather itis the problem of the whole economy. Jane who was unemployed for nearly a year may sufferfrom the problem of monetary scarcity. When Jane gets a high paying job it may solve hismonetary problem but cannot solve the choice problem. Thus, he never gets rid off the problemof economic scarcity.c) Every economy operates in a way such that is can minimize the scarcity problem. Theeconomy tries to optimum decision that will lead to efficient allocation its scarce resources. Insome economy the economic decision is taken by a central power while in some other it is left onfree market economy (Koo & Perkins, 2016). The economy where the central power exists andtakes decision on behalf of economic agents is known as socialist economy. In economy wheredifferent economic agents as consumers and producers take independent decision to maximize,their welfare is called capitalist or free market economy. In addition, there can be a combinationof these two types of economy known as mixed economy.Economic system refers to the management of production, consumption and distributionof goods and services in the economy. The economy in the United States is an example of mixedeconomy. In US, there are both public and privately owned enterprises (Sutton, 2017). The
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