Econ Macro Economics - 1987 Words

Chapter 1: Page 20; Questions - 4, 7, 9, 10, 11 4) What are the key elements of the scientific method and how does this method relate to economic principles and laws? The key elements of the scientific method are the observation of real world behavior and outcomes. Based on those observations, formulating a possible explanation of cause and effect which is a hypothesis. Next, testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis. Then, accepting, rejecting, and modifying the hypothesis, based on these comparisons. Finally, continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory. A very will tested and widely†¦show more content†¦In a market systems participants act in there own self interest. 4) What are the advantages of using capital in the production process? What is meant by the term â€Å"division of labor†? What are the advantages specialization in the use of human resources and material expenses? Explain why exchange is the necessary consequence of specialization. The monetary rewards for new production techniques accrue directly to the innovator. The market system therefore encourages extensive use and rapid development of complex capital goods. Human specialization is called the division of labor which contributes to a society’s output in several ways. Specialization makes use of differences in ability. Specialization enables individuals to take advantage of existing differences in their abilities and skills. Specialization fosters learning by doing. Even if the abilities of two people are identical, specialization may still be advantageous. Specialization saves time. By devoting time to a single task, a person avoids the loss of time incurred in shifting from one job to another. 7)Assume that a business firm finds that its profit is greatest when it produces $40 worth of product A. suppose also that each of the three techniques shown in the table to the right will produce the desired output. a. With the resources prices shown, which technique will the firm choose? Why? 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