أما الفصل الثاني فيتميز بالمزايا النسبية وإجابات نظام السوق

أب مايكرو الفصل 2: ​​المقاصة، ميزة المقارنة، ونظام السوق.

ИГРАТЬ.

ب: غير قادر على تحقيق ذلك.

ج: الاستخدام غير الفعال للموارد.

فكلما ازدادت الموارد المخصصة بالفعل لنشاط ما، قلصت المكاسب المخصصة لتكريس موارد إضافية لهذا النشاط.

1 خط مستقيم، مثل بف لسيارات السيدان وسيارات الدفع الرباعي، أو.

2 A منحنى منحنى إلى الخارج، مثل بف للدبابات والسيارات؟

الإجابة: 2.، الساعات الأولى التي تقضيها دراسة الاقتصاد هي أكثر قيمة بكثير (ولها تكلفة الفرصة أقل) من الساعة الأخيرة.

تقدم الشرکات خدمات جیدة وخدمات لسوق زس، والأسر من قبل ھذه الشرکات.

Hubbard05_ch02 - الفصل 2 المقايضة الميزة النسبية.

انقر لتعديل تفاصيل المستند.

معاينة النص غير المنسقة: الفصل 2 المقايضات والمزايا النسبية ونظام السوق فصل الفصل وأهداف التعلم 2.1 إمكانيات الإنتاج حدود وتكاليف الفرص، صفحة 38 استخدم إمكانيات الإنتاج الحدودية لتحليل تكاليف الفرص والمفاضلات. 2-2 المزايا النسبية والتجارة، صفحة 43 وصف الميزة النسبية وشرح كيفية استخدامها كأساس للتجارة. 2.3 نظام السوق، صفحة 50 شرح الفكرة الأساسية لكيفية عمل نظام السوق. M02_HUBB5441_05_SE_C02.indd 36 11/4/13 12:29 بيإم المديرون في تيسلا موتورز مواجهة التجارة هل السيارات الكهربائية كلها موجة المستقبل؟ إذا كنت مثل معظم السائقين، وربما كنت ترغب في فكرة تخطي محطة وقود لصالح الطاقة حتى سيارتك عن طريق توصيله إلى مأخذ كهربائي. ومع ذلك، فإن السيارات الكهربائية بالكامل، مثل شفروليه فولت ونيسان ليف، قد كافحت من أجل النجاح في السوق لسببين رئيسيين: (1) بطاريات الليثيوم التي تعمل بالكهرباء السيارات مكلفة، مما اضطر أسعار السيارات، و (2) البطاريات المتاحة تحتاج إلى إعادة شحنها كل 300 ميل أو نحو ذلك، مما يجعل السيارات الكهربية صعبة الاستخدام على الرحلات الطويلة. ولذلك فوجئ العديد من الناس عندما أعلنت تسلا موتورز في أوائل عام 2018 أن مبيعات سياراتها الكهربائية كانت أعلى مما كان متوقعا وأنها حققت أرباحا للمرة الأولى. تأسست تسلا في عام 2003 من قبل الملياردير إلون موسك، الذي بدأ أيضا نظام الدفع عبر الإنترنت باي بال وشركة الفضاء الخاصة سباسكس. كما بدأ العديد من المستثمرين للاعتقاد بأن تسلا من المرجح أن تصبح أول شركة سيارات كهربائية ناجحة، ارتفعت قيمة الشركة إلى أكثر من 200 مليار $. تسلا تصنع سياراتها في فريمونت، كاليفورنيا. للتنافس في سوق السيارات، يجب على المديرين تسلا اتخاذ العديد من القرارات الاستراتيجية، مثل ما إذا كان لتقديم نماذج السيارات الجديدة. في عام 2018، نموذج تسلا الوحيد، موديل S سيدان، حصل على أعلى تصنيف سيارة من أي وقت مضى من تقارير المستهلك وفاز بجائزة 2018 للسيارة الخضراء العالمية لهذا العام. في عام 2018، قدم تسلا نموذجا ثانيا، نموذج X، وهو الصليب بين مركبة رياضية (سوف) وميني فان. تم تصميم النموذج X للعائلات التي كانت ستشتري سيارات الدفع الرباعي التقليدية أو سيارات الميني فان التقليدية. يجب على مدراء تسلا أيضا أن يقرروا كيفية بيع وخدمة سياراتهم. وتباع معظم السيارات من خلال وكلاء، والتي توفر أيضا خدمة لتلك السيارات. في عام 2018، ومع ذلك، كان تسلا أي وكلاء. وبدلا من ذلك، باعت الشركة جميع سياراتها على الانترنت واعتمدت على مراكز الخدمة المملوكة للشركة لتقديم خدمات الصيانة والإصلاح. وتساءل بعض الاقتصاديين عما إذا كان تسلا تكون قادرة على تلبية أهداف المبيعات المستقبلية دون بيع السيارات من خلال وكلاء. ويضع المديرون أيضا قرارات أصغر حجما. على سبيل المثال، في جدولة p إنتاج في مصنع فريمونت، يجب على المديرين تسلا أن تقرر كل شهر كمية من سيارات السيدان نموذج S و نموذج X سيارات الدفع الرباعي لتصنيع. وكما هو الحال مع القرارات الأخرى التي يتخذها المديرون، فإن هذا ينطوي على مقايضة: إنتاج أكثر من أحد هذين النموذجين يعني إنتاج أقل من الآخر. نظرة داخلية في الصفحة 60 يناقش كيف المديرين في مرسيدس بنز تقرر أي نماذج لتصنيع ولماذا اختارت الشركة للشراكة مع تسلا موتورز لتطوير مكونات المركبات الكهربائية. المصادر: ستيفن روسوليلو، "أربعة أسباب مورغان ستانلي يحب تسلا"، وول ستريت جورنال، 14 مايو 2018؛ و "كريستوفر ف. شويتز"، "هل سيكون عام 2018 عام السيارة الكهربائية؟" نيويورك تايمز، 7 يناير 2018. الاقتصاد في حياتك المفاضلات عندما تشتري سيارة عندما تشتري سيارة تقليدية تعمل بالبنزين، وربما كنت تنظر في عوامل مثل السلامة وكفاءة الوقود. لزيادة كفاءة الوقود، مصنعي السيارات جعل السيارات التي هي صغيرة وخفيفة. السيارات الكبيرة تمتص أكثر من تأثير حادث من السيارات الصغيرة. ونتيجة لذلك، الناس عادة ما تكون أكثر أمانا قيادة السيارات الكبيرة من السيارات الصغيرة. ما الذي يمكن أن نخلص إليه من هذه الحقائق حول العلاقة بين السلامة وكفاءة الوقود؟ تحت أي ظروف يمكن أن يكون من الممكن لمصنعي السيارات لجعل السيارات التي هي على حد سواء أكثر أمنا وأكثر كفاءة في استهلاك الوقود؟ كما تقرأ الفصل، حاول الإجابة على هذه الأسئلة. يمكنك مراجعة إجاباتك مقابل تلك الواردة في الصفحة 58 في نهاية هذا الفصل. 37 M02_HUBB5441_05_SE_C02.indd 37 11/4/13 12:29 بيإم 38 C h p p t r 2 المقايضات والمزايا النسبية ونظام السوق الندرة حالة تتجاوز فيها الرغبات غير المحدودة الموارد المحدودة المتاحة للوفاء بتلك الرغبات. أنا نظام السوق، المديرين في معظم الشركات يجب اتخاذ قرارات مثل تلك التي أدلى بها مدراء تسلا ل. وتعكس هذه القرارات حقيقة أساسية للحياة الاقتصادية: فالندرة تتطلب مقايضة. فالندرة موجودة لأن لدينا رغبات غير محدودة ولكن الموارد المتاحة فقط للوفاء بتلك الرغبات. السلع والخدمات نادرة. كذلك، فإن الموارد الاقتصادية، أو عوامل الإنتاج - العمال، ورأس المال، والموارد الطبيعية، والقدرة على تنظيم المشاريع - تستخدم في صنع السلع والخدمات. وقتك نادر، مما يعني أنك تواجه المقايضات: إذا كنت تنفق ساعة دراسة لامتحان الاقتصاد، لديك ساعة واحدة أقل لقضاء دراسة لامتحان علم النفس أو الذهاب إلى السينما. إذا قررت جامعتك استخدام بعض ميزانيتها الشحيحة لشراء أجهزة كمبيوتر جديدة لمختبرات الحاسب الآلي، فلن تكون هذه الأموال متاحة لشراء كتب جديدة للمكتبة أو إعادة عرض موقف سيارات الطلاب. إذا قررت تسلا تكريس بعض العمال النادرين والآلات في مصنع تجميع فريمونت لإنتاج المزيد من سيارات الدفع الرباعي طراز X، لن تكون هذه الموارد متاحة لإنتاج المزيد من سيارات السيدان موديل S. وتصنع الأسر والشركات العديد من قراراتها في الأسواق. والتجارة هي نشاط رئيسي يحدث في الأسواق. نتائج التجارة من قرارات الملايين من الأسر المعيشية والشركات المنتشرة في جميع أنحاء العالم. من خلال الانخراط في التجارة، يمكن للناس رفع دخلهم. في هذا الفصل، نقدم لمحة عامة عن كيفية تنسيق نظام السوق للقرارات المستقلة لهذه الملايين من الأسر المعيشية والشركات. نبدأ تحليلنا للعواقب الاقتصادية للندرة وعمل نظام السوق من خلال إدخال نموذج اقتصادي مهم: حدود إمكانيات الإنتاج. 2.1 هدف التعلم استخدم حدود إمكانيات الإنتاج لتحليل تكاليف الفرص والمفاضلات. إمكانيات الإنتاج الحدودي (بف) منحنى يبين أقصى مجموعات يمكن تحقيقها من منتجين يمكن إنتاجهما بالموارد المتاحة والتكنولوجيا الحالية. إمكانيات الإنتاج الحدود وتكاليف الفرص كما رأينا في فتاحة الفصل، تسلا تدير مصنع للسيارات في فريمونت، كاليفورنيا، حيث تجمع طرازين من السيارات. ولأن موارد الشركة - العمال، والآلات، والمواد، ومهارات تنظيم المشاريع - محدودة، تواجه تسلا مفاضلة: الموارد المخصصة لإنتاج نموذج واحد غير متوفرة لإنتاج النموذج الآخر. وأوضح الفصل الأول أن النماذج الاقتصادية يمكن أن تكون مفيدة في تحليل العديد من الأسئلة. يمكننا استخدام نموذج بسيط يسمى إمكانيات الإنتاج الحدود لتحليل المفاضلات وجوه تسلا في مصنع فريمونت لها. وإمكانيات إنتاج الحدود (بف) هي منحنى يبين أقصى مجموعات يمكن تحقيقها من منتجين يمكن إنتاجهما بالموارد المتاحة والتكنولوجيا الحالية. في حالة تيسلا، تنتج الشركة فقط سيارات طراز موديل S و سيارات الدفع الرباعي النموذجية X في مصنع فريمونت، وذلك باستخدام العمال والمواد والروبوتات والآلات الأخرى. رسم بياني لإمكانيات الإنتاج الحدود يستخدم الشكل 2.1 حدود إمكانيات الإنتاج لتوضيح المفاضلات التي يواجهها تسلا. يتم رسم الأرقام من الجدول في الرسم البياني. يمثل الخط في الرسم البياني إمكانات إنتاج تسلا الحدود. إذا تسلا يستخدم جميع مواردها لإنتاج سيارات السيدان نموذج S، فإنه يمكن أن تنتج 80 في اليوم الواحد A في نهاية واحدة من إمكانيات الإنتاج الحدود. إذا يستخدم تسلا جميع مواردها لإنتاج نموذج X سيارات الدفع الرباعي، فإنه يمكن أن تنتج 80 في نقطة E اليومية في الطرف الآخر من إمكانيات الإنتاج الحدود. إذا تكرس تسلا الموارد لإنتاج كل من المركبات، فإنه يمكن أن يكون في نقطة مثل B، حيث تنتج 60 سيارات السيدان و 20 سيارات الدفع الرباعي. ويمكن الحصول على جميع المجموعات إما على النقاط الشبيهة بالحدود A و B و C و D و E - أو داخل النقطة الشبيهة بالحدود F - بالموارد المتاحة. تركيبات على الحدود فعالة لأن جميع الموارد المتاحة يتم استخدامها بالكامل M02_HUBB5441_05_SE_C02.indd 38 11/4/13 12:29 بيإم 39 إمكانيات الإنتاج حدود وتكاليف الفرصة خيارات إنتاج تسلا في مصنع فريمونت اختيار كمية سيارات السيدان أنتجت كمية سيارات الدفع الرباعي أنتجت 80 0 B 60 20 C 40 40 D 20 60 E 0 80 كمية سيارات السيدان المنتجة يوميا 80 مزيج غير قابل للتحقيق بالموارد الحالية أب 60 إمكانات إنتاج تسلا الحدودية تبين مبادلتها بين إنتاج سيارات السيدان وسيارات الدفع الرباعي G ميكونلاب الرسوم المتحركة الشكل 2.1 إمكانات إنتاج تسلا الحدود تواجه تسلا مفاضلة: لبناء سيارة واحدة أكثر، يجب أن بناء سيارات الدفع الرباعي واحدة أقل. إمكانيات الإنتاج الحدودية توضح وجوه تسلا المفاضلة. وتعتبر تركيبات إمكانيات الإنتاج مثل النقاط A و B و C و D و E - فعالة من الناحية التقنية لأن الإنتاج الأقصى يتم الحصول عليه من الموارد المتاحة. إن التوليفات داخل النقطة الشبيهة بالحدود F - غير فعالة بسبب عدم استخدام بعض الموارد. تركيبات خارج نقطة تشبه الحدود G - غير قابلة للتحقيق مع الموارد الحالية. C 40 F 30 D 20 E 0 10 20 40 50 60 80 كمية سيارات الدفع الرباعي المنتجة يوميا مجموعة غير فعالة لعدم استخدام جميع الموارد واستخدام أقل الموارد الممكنة لإنتاج كمية معينة من النواتج. وتكون التركيبات داخل النقطة الشبيهة بالحدود F - غير فعالة لأن الإخراج الأقصى لا يتم الحصول عليه من الموارد المتاحة - ربما لأن خط التجميع لا يعمل في قدرته. قد ترغب تسلا في أن تكون خارج الحدود - عند نقطة مثل G، حيث ستنتج 60 سيارة سيدان و 50 سيارة رياضية متعددة الاستخدامات في اليوم الواحد، ولكن النقاط التي تتجاوز حدود إمكانات الإنتاج غير قابلة للتحقيق، نظرا للموارد الحالية للشركة. لإنتاج مزيج في G، سوف تسلا تحتاج المزيد من الآلات والمزيد من العمال. لاحظ أنه إذا كانت تسلا تنتج بكفاءة وأنها على إمكانيات الإنتاج الحدودي، والطريقة الوحيدة لإنتاج أكثر من سيارة واحدة هو إنتاج أقل من السيارة الأخرى. أذكر من الفصل الأول أن تكلفة الفرصة البديلة لأي نشاط هي البديل الأعلى قيمة التي يجب أن تعطى للانخراط في هذا النشاط. وبالنسبة لشركة تسلا، فإن تكلفة الفرصة البديلة لإنتاج سيارة دفع رباعي أخرى هي عدد سيارات السيدان التي لن تتمكن الشركة من إنتاجها لأنها تحولت هذه الموارد إلى إنتاج سيارات الدفع الرباعي. على سبيل المثال، في الانتقال من النقطة B إلى النقطة C، فإن تكلفة الفرصة البديلة لإنتاج 20 سيارة سوف متعددة في اليوم هي أقل 20 سيارات السيدان التي تسلا يمكن أن تنتج. ما نقطة على إمكانيات الإنتاج الحدود هو الأفضل؟ ولا يمكننا أن نقول دون مزيد من المعلومات. إذا كان طلب المستهلكين على سيارات الدفع الرباعي أكبر من الطلب على سيارات السيدان، ومن المرجح أن تختار نقطة أقرب إلى E. إذا كان الطلب على سيارات السيدان أكبر من الطلب على سيارات الدفع الرباعي، ومن المرجح أن تختار نقطة أقرب إلى A. ميكونلاب كونسيبت تشيك M02_HUBB5441_05_SE_C02.indd 39 تكلفة الفرصة البديل الأعلى قيمة التي يجب أن تعطى للانخراط في النشاط. 11/4/13 12:29 بيإم 40 C h p p t r 2 مقايضات، ميزة نسبية، ونظام السوق حل المشكلة 2.1 ميكونلاب الرسوم المتحركة التفاعلية رسم إمكانيات الإنتاج الحدود ل تسلا موتورز ب. استخدام البيانات في الجدول لرسم إمكانيات الإنتاج الرسم البياني الحدودية يوضح تسلا المفاضلة بين تجميع سيارات السيدان وتجميع سيارات الدفع الرباعي. قم بتسمية المحور الرأسي "كمية سيارات السيدان المنتجة يوميا". تسمية المحور الأفقي "كمية سيارات الدفع الرباعي المنتجة يوميا". تأكد من تسمية القيم التي تتقاطع فيها إمكانات إنتاج تسلا مع المحاور الرأسية والأفقية. ج. تسمية النقاط التي تمثل الخيار D واختيار E. إذا تسلا هو في الاختيار D، ما هي تكلفتها الفرصة لصنع 10 سيارات الدفع الرباعي أكثر؟ لنفترض، لبساطة، أنه خلال أي أسبوع معين، لا يمكن زيادة عدد الآلات وعدد العاملين في مصنع فريمونت تسلا موتورز. وبالتالي فإن عدد من سيارات الدفع الرباعي أو سيارات الدفع الرباعي يمكن أن تنتج الشركة خلال الأسبوع يعتمد على عدد ساعات مخصصة لتجميع كل من نماذج مختلفة. نفترض أن سيارات الدفع الرباعي هي أكثر صعوبة في التجمع، لذلك إذا تسلا يكرس ساعة لتجميع سيارات السيدان، وسوف تنتج 15 مركبة، ولكن إذا تكلا تكرس ساعة لإنتاج سيارات الدفع الرباعي، وسوف تنتج فقط 10 مركبة. نفترض أن المصنع يمكن تشغيل لمدة 8 ساعات يوميا. U a. المعلومات المقدمة لإكمال الجدول التالي: ساعات سبنت ماكينغ تشويس سيارات الدفع الرباعي سيارات الدفع الرباعي A 8 0 B 7 1 C 6 2 D 5 3 E 4 4 F 3 5 G 2 6 H 1 7 I 0 الكمية المنتجة يوميا سيارات الدفع الرباعي سيارات الدفع الرباعي 8 حل المشكلة الخطوة 1: راجع مادة الفصل. هذه المشكلة تتعلق باستخدام حدود إمكانيات الإنتاج لتحليل المقايضات، لذا قد ترغب في مراجعة قسم "رسم بياني لإمكانيات الإنتاج الحدودي"، والذي يبدأ في الصفحة 38. الخطوة 2: الإجابة على الجزء (أ) من خلال ملء الجدول. إذا تسلا يمكن تجميع 15 سيارات السيدان في 1 ساعة، ثم مع خيار A، فإنه يمكن تجميع 120 سيارات السيدان و 0 سيارات الدفع الرباعي. لأن تسلا يمكن تجميع 10 سيارات الدفع الرباعي في 1 ساعة، مع خيار B، وسوف تنتج 105 سيارات السيدان و 10 سيارات الدفع الرباعي. وباستخدام منطق مماثل، يمكنك ملء الخلايا المتبقية في الجدول على النحو التالي: ساعات سبينت ماكينغ تشويس سيارات الدفع الرباعي سيارات الدفع الرباعي الكمية المنتجة يوميا سيارات الدفع الرباعي سيارات الدفع الرباعي A 8 0 120 0 B 7 1 105 10 C 6 2 90 20 D 5 3 75 30 E 4 4 60 40 F 3 5 45 50 G 6 30 60 1 7 15 70 I M02_HUBB5441_05_SE_C02.indd 40 2 H 0 8 0 80 11/4/13 12:29 بيإم إمكانيات الإنتاج حدود وتكاليف الفرصة 41 الخطوة 3: الإجابة على جزء ( ب) من خلال رسم إمكانيات الإنتاج الرسم البياني الحدودي. باستخدام البيانات في الجدول في الخطوة 2، يجب رسم رسم بياني يشبه هذا: كمية من سيارات السيدان المنتجة يوميا 120 إمكانيات الإنتاج الحدود التي تبين المفاضلة بين صنع سيارات السيدان وجعل سيارات الدفع الرباعي 0 كمية سيارات الدفع الرباعي المنتجة يوميا 80 إذا تسلا تكرس كل 8 ساعات لتجميع سيارات السيدان، وسوف تنتج 120 سيارات السيدان. ولذلك، فإن إمكانات الإنتاج تسلا الحدود تتقاطع المحور الرأسي في 120 سيارات السيدان المنتجة. إذا تكرس تسلا كل 8 ساعات لتجميع سيارات الدفع الرباعي، وسوف تنتج 80 سيارات الدفع الرباعي. ولذلك، فإن إمكانات الإنتاج تسلا الحدود تتقاطع المحور الأفقي في 80 سيارات الدفع الرباعي المنتجة. الخطوة 4: أجب عن الجزء (ج) من خلال وضع علامة على الخيارين D و E على الرسم البياني. ويمكن رسم النقاط المتعلقة بالخيارين D و E باستخدام المعلومات الواردة في الجدول: كمية سيارات السيدان المنتجة يوميا 120 100 80 الاختيار D الاختيار E 60 40 20 0 20 40 60 80 كمية سيارات الدفع الرباعي المنتجة يوميا الانتقال من الاختيار D إلى الاختيار E يزيد إنتاج تسلا من سيارات الدفع الرباعي بنسبة 10 ولكن يخفض إنتاجها من سيارات السيدان بنسبة 15. وبالتالي، فإن تكلفة الفرصة تسلا لإنتاج 10 سيارات الدفع الرباعي أكثر مما يجعل 15 سيارات السيدان أقل. دورك: لمزيد من الممارسة، قم بالمشكلة ذات الصلة 1.10 في الصفحة 63 في نهاية هذا الفصل. M02_HUBB5441_05_SE_C02.indd 41 الخطة الدراسية ميكونلاب 11/4/13 12:29 بيإم 42 C هاب تي r 2 المقايضات والمزايا النسبية ونظام السوق زيادة تكاليف الفرص الهامشية يمكننا استخدام إمكانات الإنتاج الحدودية لاستكشاف القضايا المتعلقة بالاقتصاد ككل. لنفترض أننا نقسم كل السلع والخدمات المنتجة في الاقتصاد إلى نوعين فقط: السلع العسكرية والسلع المدنية. في الشكل 2.2، دعونا ترك الدبابات تمثل السلع العسكرية والسيارات تمثل السلع المدنية. وإذا خصصت جميع موارد البلد لإنتاج السلع العسكرية، يمكن إنتاج 400 دبابة في سنة واحدة. وإذا خصصت جميع الموارد لإنتاج السلع المدنية، يمكن إنتاج 500 سيارة في سنة واحدة. ويؤدي تكريس الموارد لإنتاج السلع إلى أن يكون الاقتصاد في نقاط أخرى على طول حدود إمكانات الإنتاج. لاحظ أن هذا الاحتمالات الإنتاج الحدود هو انحنى الخارج بدلا من كونها خط مستقيم. ونظرا لانحناء المنحنى، فإن تكلفة الفرصة البديلة للسيارات من حيث الدبابات تعتمد على مكان الاقتصاد حاليا على حدود إمكانات الإنتاج. على سبيل المثال، لزيادة إنتاج السيارات من 0 إلى 200-الانتقال من النقطة ألف إلى النقطة ب - على الاقتصاد أن يتخلى عن 50 دبابة فقط. ولكن لزيادة إنتاج السيارات من قبل 200 سيارة أخرى - الانتقال من النقطة باء إلى النقطة ج - على الاقتصاد أن يتخلى عن 150 دبابة. وفي الوقت الذي ينتقل فيه الاقتصاد إلى حدود إمكانيات الإنتاج، فإنه يواجه زيادة في تكاليف الفرص الهامشية لأن زيادة إنتاج السيارات بكمية معينة يتطلب انخفاضا أكبر وأكبر في إنتاج الخزانات. وتزداد تكاليف الفرص الحدية بسبب أن بعض العمال والآلات والموارد الأخرى أكثر ملاءمة للاستخدام الواحد من استخدام آخر. وفي النقطة ألف، تضطر بعض الموارد المناسبة تماما لإنتاج السيارات إلى إنتاج خزانات. ويتيح تحويل هذه الموارد إلى إنتاج سيارات عن طريق الانتقال من النقطة ألف إلى النقطة باء زيادة كبيرة في إنتاج السيارات، دون خسارة كبيرة في إنتاج الخزانات. ولكن مع انتقال الاقتصاد إلى أسفل إمكانات الإنتاج الحدودية، يتم تحويل المزيد والمزيد من الموارد التي هي أكثر ملاءمة لإنتاج الدبابات إلى إنتاج السيارات. ونتيجة لذلك، أصبحت الزيادات في إنتاج السيارات أصغر على نحو متزايد، في حين أن الانخفاضات في إنتاج الخزانات أصبحت أكبر على نحو متزايد. ونحن نتوقع في معظم الحالات أن احتمالات الحدود الإنتاج سوف تنحرف إلى الخارج بدلا من الخطية كما هو الحال في تسلا سبيل المثال الذي نوقش في وقت سابق. وتظهر فكرة زيادة تكاليف الفرص الهامشية مفهوما اقتصاديا هاما: فكلما زادت الموارد المخصصة بالفعل لنشاط ما، قلصت المكاسب لتخصيص موارد إضافية لهذا النشاط. على سبيل المثال، كلما زاد عدد الساعات التي قضيتها في دراسة الاقتصاد، كلما زادت درجة الاختبار في كل ساعة إضافية تنفقها، وكلما زادت تكلفة الفرصة البديلة لاستخدام الساعة بهذه الطريقة. وكلما زادت الأموال التي تخصصها الشركة للبحث والتطوير خلال سنة معينة، كلما قل حجم المعرفة المفيدة التي تتلقاها من كل دولار إضافي - وكلما زادت تكلفة الفرصة البديلة لاستخدام الأموال بهذه الطريقة. وكلما زادت الأموال التي تنفقها الحكومة الاتحادية على تنظيف البيئة خلال سنة معينة، كلما قلص التلوث من كل دولار إضافي، وكلما زادت تكلفة الفرصة البديلة لاستخدام الأموال بهذه الطريقة. ميكونلاب كونسيبت تشيك ميكونلاب أنيماشيون الشكل 2.2 زيادة تكاليف الفرص الهامشية مع انتقال الاقتصاد إلى أسفل الحدود المحتملة للإنتاج، فإنه يواجه زيادة في تكاليف الفرص الهامشية لأن زيادة إنتاج السيارات بمقدار معين يتطلب انخفاضا أكبر وأكبر في إنتاج الخزانات. على سبيل المثال، لزيادة إنتاج السيارات من 0 إلى 200-الانتقال من النقطة ألف إلى النقطة ب - الاقتصاد أن تتخلى عن 50 دبابة فقط. ولكن لزيادة إنتاج السيارات من قبل 200 سيارة أخرى - الانتقال من النقطة باء إلى النقطة ج - على الاقتصاد أن يتخلى عن 150 دبابة. M02_HUBB5441_05_SE_C02.indd 42 زيادة إنتاج السيارات بنسبة 200 هنا. . . الدبابات . . . ويقلل من إنتاج خزان بنسبة 50 فقط. 400 350 زيادة إنتاج السيارات بنسبة 200 هنا. . . A B. . . يقلل من إنتاج الخزان بمقدار 150. C 200 0 200 400 500 السيارات 11/4/13 12:29 بيإم المزايا النسبية وخزانات التجارة 43 الدبابات 500 400 400 B 300 200 A 0 400 450 500 625 السيارات (أ) تحويل إمكانات الإنتاج (ب) التغير التكنولوجي في صناعة السيارات ميكونلاب الرسوم المتحركة الشكل 2.3 لوحة النمو الاقتصادي (أ) تبين أنه كلما ازدادت الموارد الاقتصادية المتاحة وتحدث التغير التكنولوجي، يمكن للاقتصاد الانتقال من النقطة ألف إلى النقطة باء، والدبابات والمزيد من السيارات. ويبين الفريق (ب) نتائج التغير التكنولوجي في صناعة السيارات التي تزيد من كمية المركبات التي يمكن أن ينتجها العمال سنويا، مع ترك الكمية القصوى من الخزانات التي يمكن أن تنتجها دون تغيير. وتمثل التحولات الخارجية في إمكانيات الإنتاج الحدودية النمو الاقتصادي. النمو الاقتصادي في أي وقت من الأوقات، يتم إصلاح إجمالي الموارد المتاحة لأي اقتصاد. لذلك، إذا، على سبيل المثال، الولايات المتحدة تنتج المزيد من السيارات، يجب أن تنتج أقل من شيء آخر الدبابات في مثالنا. ومع مرور الوقت، قد تزداد الموارد المتاحة للاقتصاد. فعلى سبيل المثال، قد يزداد كل من القوة العاملة ورأس المال - أي كمية الآلات وغيرها من رأس المال المادي المتاح في البلد. وتؤدي الزيادة في قوة العمل المتاحة ورأس المال الرأسمالي إلى تحويل إمكانيات الإنتاج إلى الخارج للاقتصاد الأمريكي، مما يجعل من الممكن إنتاج المزيد من السيارات والمزيد من الدبابات. ويوضح الفريق (أ) من الشكل 2-3 أن الاقتصاد يمكن أن يتحرك من النقطة ألف إلى النقطة باء، مما ينتج عنه المزيد من الدبابات والمزيد من السيارات. وبالمثل، يتيح التغير التكنولوجي إنتاج المزيد من السلع بنفس العدد من العمال ونفس الكمية من الآلات التي تحول أيضا إمكانيات الإنتاج إلى الخارج. ولا ينبغي للتغير التكنولوجي أن يؤثر على جميع القطاعات بالتساوي. ويظهر الجدول (ب) من الشكل 2-3 نتائج التغير التكنولوجي في صناعة السيارات التي تزيد من كمية السيارات التي يمكن أن ينتجها العمال سنويا، مع ترك كمية الخزانات التي يمكن أن تنتجها دون تغيير. وتمثل التحولات الخارجية في إمكانيات الإنتاج الحدودية النمو الاقتصادي لأنها تسمح للاقتصاد بزيادة إنتاج السلع والخدمات، مما يرفع في نهاية المطاف مستوى المعيشة. وفي الولايات المتحدة وغيرها من البلدان ذات الدخل المرتفع، ساعد نظام السوق عملية النمو الاقتصادي التي زادت على مدى ال 200 سنة الماضية بشكل كبير رفاه الشخص العادي. ميكونلاب مفهوم تحقق الميزة النسبية والتجارة يمكننا استخدام مفاهيم إمكانيات الإنتاج الحدود وتكاليف الفرصة لفهم النشاط الاقتصادي الأساسي للتجارة. والأسواق هي بالأساس التجارة، وهو فعل البيع والشراء. أحيانا نحن التجارة مباشرة، كما عندما الأطفال التجارة بطاقة البيسبول واحدة لبطاقة البيسبول آخر. ولكن في كثير من الأحيان نحن التجارة بشكل غير مباشر: نبيع خدمات العمل لدينا على سبيل المثال، محاسب، مندوب مبيعات، أو ممرضة للمال، ومن ثم نستخدم المال لشراء السلع والخدمات. على الرغم من أن التجارة في هذه الحالات تتم بشكل غير مباشر، في نهاية المطاف المحاسب، مندوب مبيعات، أو ممرضة يتاجر خدماته أو الطعام لها، والملابس، والسلع والخدمات الأخرى. ومن الفوائد الكبرى للتجارة أنه يجعل من الممكن للناس أن يصبحوا أفضل حالا من خلال زيادة إنتاجهم واستهلاكهم على حد سواء. M02_HUBB5441_05_SE_C02.indd 43 النمو الاقتصادي قدرة الاقتصاد على زيادة إنتاج السلع والخدمات. خطة الدراسة ميكونلاب 2.2 هدف التعلم وصف الميزة النسبية وشرح كيفية استخدامه كأساس للتجارة. التجارة فعل البيع والشراء. 06/11/13 2:18 آم 44 C h p p t r 2 المقايضات والمزايا النسبية ونظام السوق التخصص والمكاسب من التجارة النظر في الوضع التالي: أنت وجارك على حد سواء أشجار الفاكهة على الممتلكات الخاصة بك. في البداية، لنفترض أن لديك أشجار التفاح فقط وجارك لديه أشجار الكرز فقط. في هذه الحالة، إذا كنت على حد سواء مثل التفاح والكرز، وهناك فرصة واضحة لكلا لكسب من التجارة: كنت التجارة بعض التفاح الخاص بك لبعض الكرز جارك، مما يجعلك على حد سواء أفضل حالا. ولكن ماذا لو كان هناك أشجار التفاح والكرز المتنامية على كل من الممتلكات الخاصة بك؟ وفي هذه الحالة، لا يزال هناك مكاسب من التجارة. على سبيل المثال، جارك قد تكون جيدة جدا في اختيار التفاح، وكنت قد تكون جيدة جدا في اختيار الكرز. سيكون من المنطقي لجارتك التركيز على اختيار التفاح ولك أن تركز على اختيار الكرز. يمكنك ثم التجارة بعض الكرز اخترت لبعض التفاح يختار الجيران الخاص بك. ولكن ماذا لو كان جارك أفضل في اختيار كل من التفاح والكرز من أنت؟ يمكننا استخدام حدود إمكانيات الإنتاج (بفس) لإظهار كيف يمكن لجارك الاستفادة من التداول معك على الرغم من أنها أفضل من كنت في اختيار كل من التفاح والكرز. (للبساطة، ولأنه لن يكون له أي تأثير على الاستنتاجات التي نرسمها، فإننا سوف نفترض أن بفس في هذا المثال هي خطوط مستقيمة). ويبين الجدول في الشكل 2.4 كم التفاح وكم الكرز أنت وجارك يمكن اختيار في أسبوع واحد. الرسم البياني في الشكل يستخدم البيانات من الجدول لبناء بفس. لوحة (أ) يظهر بف الخاص بك. إذا كنت تكرس كل وقتك لاختيار التفاح، يمكنك اختيار 20 جنيه من التفاح في الأسبوع. إذا كنت تكرس كل وقتك لاختيار الكرز، يمكنك اختيار 20 جنيه في الأسبوع. لوحة (ب) تبين أنه إذا كان جارك يكرس كل وقتها في اختيار التفاح، وقالت انها يمكن أن تختار 30 جنيه. إذا تكرس كل وقتها في اختيار الكرز، وقالت انها يمكن أن تختار 60 جنيه. و بفس في الشكل 2.4 تبين كم التفاح والكرز لك وجارك يمكن أن تستهلك، دون التجارة. لنفترض أنه عندما لا تتاجر مع جارك، يمكنك اختيار وتستهلك 8 رطل من التفاح و 12 رطلا من الكرز في الأسبوع. هذا التفاح جارك الكرز التفاح الكرز تكريس كل الوقت لاختيار التفاح 20 جنيه 0 جنيه 30 جنيه 0 جنيه تكريس كل الوقت لاختيار الكرز 0 جنيه 20 جنيه 0 جنيه 60 جنيه التفاح (جنيه) التفاح (جنيه) 30 20 بك بف 0 20 (أ) إمكانيات الإنتاج الخاص بك الحدود الجيران بف الكرز 0 60 (ب) إمكانات الإنتاج جارك الحدود الكرز ميكونلاب الرسوم المتحركة الشكل 2.4 إمكانيات الإنتاج بالنسبة لك وجارك، دون التجارة ويبين الجدول كم جنيه من التفاح وكم جنيه من الكرز أنت وجارك يمكن كل اختيار في أسبوع واحد. الرسوم البيانية استخدام البيانات من الجدول لبناء بفس لك ولجارك. لوحة (أ) يظهر بف الخاص بك. إذا كنت تكرس كل وقتك في اختيار التفاح ولا شيء لاختيار الكرز، يمكنك M02_HUBB5441_05_SE_C02.indd 44 يمكن اختيار 20 جنيه. إذا كنت تكرس كل وقتك لاختيار الكرز، يمكنك اختيار 20 جنيه. لوحة (ب) تبين أنه إذا كان جارك يكرس كل وقتها في اختيار التفاح، وقالت انها يمكن أن تختار 30 جنيه. إذا تكرس كل وقتها في اختيار الكرز، وقالت انها يمكن أن تختار 60 جنيه. 11/4/13 12:29 بيإم الميزة النسبية والتفاح التجاري الإنتاج مع التجارة الاستهلاك الخاص بك بدون تجارة 20 10 8 التفاح 30 0 بيف الجيران (أ) الإنتاج والاستهلاك الخاص بك مع التجارة إنتاج جارك مع (ج) إستهلاك جارك مع التجارة D 10 9 12 15 20 استهلاك جارك بدون تجارة استهلاكك مع التجارة با 45 42 45 0 60 الكرز (ب) إنتاج الجيران واستهلاكه مع التجارة ميكونلاب الرسوم المتحركة الشكل 2.5 مكاسب من التجارة عندما كنت لا تتاجر مع جارك، يمكنك اختيار وتستهلك 8 رطل من التفاح و 12 رطلا من الكرز في الأسبوع نقطة أ في لوحة (أ). عندما جارك لا تتاجر معك، وقالت انها يختار ويستهلك 9 جنيه من التفاح و 42 جنيها من الكرز في الأسبوع C نقطة في لوحة (ب). إذا كنت متخصصا في اختيار التفاح، يمكنك اختيار 20 جنيه. إذا كان جارك متخصصا في اختيار الكرز، وقالت انها يمكن أن تختار 60 جنيه. إذا كنت تتداول 10 رطل من التفاح الخاص بك لمدة 15 رطل من الكرز جارك، سوف تكون قادرة على استهلاك 10 رطلا من التفاح و 15 رطل من الكرز نقطة B في لوحة (أ). جارك يمكن أن تستهلك الآن 10 جنيه من التفاح و 45 رطلا من الكرز نقطة D في لوحة (ب). أنت وجارك على حد سواء أفضل حالا نتيجة لهذه التجارة. ويمثل مزيج من التفاح والكرز من النقطة أ في لوحة (أ) من الشكل 2.5. عندما جارك لا تتاجر معك، وقالت انها يختار ويستهلك 9 جنيه من التفاح و 42 جنيها من الكرز في الأسبوع. ويمثل هذا المزيج من التفاح والكرز بالنقطة C في اللوحة (ب). بعد سنوات من قطف واستهلاك التفاح والكرز الخاصة بك، لنفترض جارك يأتي لك يوم واحد مع الاقتراح التالي: وقالت انها تقدم للتجارة لكم 15 جنيه من الكرز لها لمدة 10 جنيه من التفاح الخاص بك في الأسبوع المقبل. هل تقبل هذا العرض؟ كما يمكننا أن تظهر، يجب أن تقبل لأنك سوف ينتهي مع المزيد من التفاح والمزيد من الكرز للاستهلاك. للاستفادة من اقتراحها، يجب أن تتخصص في اختيار التفاح فقط بدلا من تقسيم وقتك بين اختيار التفاح واختيار الكرز. ونحن نعلم متخصصة تسمح لك لاختيار 20 جنيه من التفاح. يمكنك تداول 10 رطل من التفاح إلى جارك لمدة 15 رطل من الكرز لها. والنتيجة هي أنك سوف تكون قادرة على استهلاك 10 رطل من التفاح و 15 رطل من الكرز (النقطة ب في لوحة (أ) من الشكل 2.5). كنت أفضل بشكل أفضل كنتيجة للتداول مع جارك: يمكنك الآن تستهلك 2 جنيه أكثر من التفاح و 3 جنيه من الكرز مما كنت تستهلك دون التداول. كنت قد تجاوزت بف الخاص بك! وقد استفاد جارك أيضا من التجارة. من خلال التخصص في اختيار الكرز فقط، وقالت انها يمكن أن تختار 60 جنيه. انها تتداول 15 جنيه من الكرز لك لمدة 10 جنيه من التفاح. ثم يمكن أن تستهلك 10 رطلا من التفاح و 45 رطلا من الكرز (النقطة D في لوحة (ب) من الشكل 2.5). هذا المزيج هو 1 جنيه أكثر من التفاح و 3 جنيه من الكرز مما كانت تستهلك قبل التداول معك. وقد انتقلت أيضا إلى ما وراءها. یلخص الجدول 2.1 التغیرات في الإنتاج والاستھلاك التي تنتج عن تجارتك مع جارك. (في هذا المثال، اخترنا معدل معين واحد من الكرز التجاري للتفاح -15 رطلا من الكرز لمدة 10 رطلا من التفاح، ومع ذلك، هناك العديد من معدلات الكرز التجارية الأخرى للتفاح التي من شأنها أيضا أن تجعلك وجارك أفضل حالا. ) مفهوم ميكونلاب تحقق ميزة مطلقة مقابل ميزة المقارنة ولعل الجانب الأكثر وضوحا من المثال السابق هو أن جارك يستفيد من التداول معك على الرغم من أنها أفضل مما كنت في اختيار كل من التفاح والكرز. والميزة المطلقة هي قدرة الفرد أو الشركة أو البلد على إنتاج المزيد من السلع أو الخدمات من المنافسين باستخدام نفس الكمية من الموارد. Your neighbor has an absolute advantage over you in picking both apples and M02_HUBB5441_05_SE_C02.indd 45 Absolute advantage The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources. 11/4/13 12:29 PM 46 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System Table 2.1 You A Summary of the Gains from Trade Your Neighbor Cherries (in pounds) Apples (in pounds) Cherries (in pounds) Production and consumption without trade 8 12 9 42 Production with trade 20 0 0 60 Consumption with trade 10 15 10 45 Gains from trade (increased consumption) Comparative advantage The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. Apples (in pounds) 2 3 1 3 cherries because she can pick more of each fruit than you can in the same amount of time. Although it seems that your neighbor should pick her own apples and her own cherries, we have just seen that she is better off specializing in picking cherries and leaving picking apples to you. We can consider further why both you and your neighbor benefit from specializing in picking only one fruit. First, think about the opportunity cost to each of you of picking the two fruits. We saw from the PPF in Figure 2.4 that if you devoted all your time to picking apples, you would be able to pick 20 pounds of apples per week. As you move down your PPF and shift time away from picking apples to picking cherries, you have to give up 1 pound of apples for each pound of cherries you pick (the slope of your PPF is -1. For a review of calculating slopes, see the appendix to Chapter 1.) Therefore, your opportunity cost of picking 1 pound of cherries is 1 pound of apples. By the same reasoning, your opportunity cost of picking 1 pound of apples is 1 pound of cherries. Your neighbor’s PPF has a different slope, so she faces a different trade-off: As she shifts time from picking apples to picking cherries, she has to give up 0.5 pound of apples for every 1 pound of cherries she picks (the slope of your neighbor’s PPF is -0.5). As she shifts time from picking cherries to picking apples, she gives up 2 pounds of cherries for every 1 pound of apples she picks. Therefore, her opportunity cost of picking 1 pound of apples is 2 pounds of cherries, and her opportunity cost of picking 1 pound of cherries is 0.5 pound of apples. Table 2.2 summarizes the opportunity costs for you and your neighbor of picking apples and cherries. Note that even though your neighbor can pick more apples in a week than you can, the opportunity cost of picking apples is higher for her than for you because when she picks apples, she gives up more cherries than you do. So, even though she has an absolute advantage over you in picking apples, it is more costly for her to pick apples than it is for you. The table also shows that her opportunity cost of picking cherries is lower than yours. Comparative advantage is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. In picking apples, your neighbor has an absolute advantage over you, while you have a comparative advantage over her. Your neighbor has both an absolute advantage and a comparative advantage over you in picking cherries. As we have seen, you are better off specializing in picking apples, and your neighbor is better off specializing in picking cherries. MyEconLab Concept Check Comparative Advantage and the Gains from Trade We have just arrived at an important economic principle: The basis for trade is comparative advantage, not absolute advantage. The fastest apple pickers do not necessarily do Table 2.2 M02_HUBB5441_05_SE_C02.indd 46 Opportunity Cost of Picking 1 Pound of Cherries You 1 pound of cherries 1 pound of apples Your Neighbor Opportunity Costs of Picking Apples and Cherries Opportunity Cost of Picking 1 Pound of Apples 2 pounds of cherries 0.5 pound of apples 11/4/13 12:29 PM Comparative Advantage and Trade 47 Don’t Let This Happen to You Don’t Confuse Absolute Advantage and Comparative Advantage First, make sure you know the definitions: • Absolute advantage. The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources. In our example, your neighbor has an absolute advantage over you in both picking apples and picking cherries. • Comparative advantage. The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors. In our example, your neighbor has a comparative advantage in picking cherries, but you have a comparative advantage in picking apples. Keep these two key points in mind: 1. It is possible to have an absolute advantage in producing a good or service without having a comparative advantage. This is the case with your neighbor picking apples. 2. It is possible to have a comparative advantage in producing a good or service without having an absolute advantage. This is the case with your picking apples. MyEconLab Study Plan Your Turn: Test your understanding by doing related problem 2.5 on page 64 at the end of this chapter. much apple picking. If the fastest apple pickers have a comparative advantage in some other activity—picking cherries, playing Major League Baseball, or being industrial engineers—they are better off specializing in that activity. Individuals, firms, and countries are better off if they specialize in producing goods and services for which they have a comparative advantage and obtain the other goods and services they need by trading. We will return to the important concept of comparative advantage in Chapter 9, which is devoted to the subject of international trade. MyEconLab Concept Check Solved Problem 2.2 MyEconLab Interactive Animation Comparative Advantage and the Gains from Trade Suppose that Canada and the United States both produce maple syrup and honey, which are sold for the same price in both countries. These are the combinations of the two goods that each country can produce in one day using the same amounts of capital and labor: Canada Honey (in tons) United States Maple Syrup (in tons) Honey (in tons) Maple Syrup (in tons) 0 60 0 50 10 45 10 40 20 30 20 30 30 15 30 20 40 0 40 10 50 0 a. Which country has a comparative advantage in producing maple syrup? Which country has a comparative advantage in producing honey? ب. Suppose that Canada is currently producing 30 tons of honey and 15 tons of maple syrup, and the United States is currently producing 10 tons of honey and 40 tons of maple syrup. Demonstrate that Canada and the United States can both be better off if they specialize in producing only one good and trade for the other. ج. Illustrate your answer to question (b) by drawing a PPF for the United States and a PPF for Canada. Show on your PPFs the combinations of honey and maple syrup produced and consumed in each country before and after trade. Solving the Problem Step 1: Review the chapter material. This problem is about comparative ­ dvantage, a so you may want to review the section “Absolute Advantage versus ­ Comparative Advantage,” which begins on page 45. M02_HUBB5441_05_SE_C02.indd 47 11/4/13 12:29 PM 48 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System Step 2: Answer part (a) by calculating which country has a comparative advantage in each activity. Remember that a country has a comparative advantage in producing a good if it can produce the good at the lowest opportunity cost. When Canada produces 1 more ton of honey, it produces 1.5 tons less of maple syrup. When the United States produces 1 more ton of honey, it produces 1 ton less of maple syrup. Therefore, the United States’ opportunity cost of producing honey—1 ton of maple syrup—is lower than Canada’s—1.5 tons of maple syrup. When Canada produces 1 more ton of maple syrup, it produces 0.67 ton less of honey. When the United States produces 1 more ton of maple syrup, it produces 1 ton less of honey. Therefore, Canada’s opportunity cost of producing maple syrup—0.67 ton of honey—is lower than that of the United States—1 ton of honey. We can conclude that the United States has a comparative advantage in the production of honey and Canada has a comparative advantage in the production of maple syrup. Step 3: Answer part (b) by showing that specialization makes Canada and the United States better off. We know that Canada and the United States should each specialize where it has a comparative advantage. If both countries specialize, Canada will produce 60 tons of maple syrup and 0 tons of honey, and the United States will produce 0 tons of maple syrup and 50 tons of honey. After both countries specialize, the United States could then trade 30 tons of honey to Canada for 40 tons of maple syrup. (Other mutually beneficial trades are possible as well.) We can summarize the results in a table: Before Trade After Trade Honey (in tons) Maple Syrup (in tons) Honey (in tons) Maple Syrup (in tons) Canada 30 15 30 20 United States 10 40 20 40 The United States is better off after trade because it can consume the same amount of maple syrup and 10 more tons of honey. Canada is better off after trade because it can consume the same amount of honey and 5 more tons of maple syrup. Step 4: Answer part (c) by drawing the PPFs. Honey Honey Canadian production and consumption before trade 40 50 U. S. consumption after trade Canadian consumption after trade 30 Canadian production after trade 0 60 15 20 (a) Canada’s PPF MyEconLab Study Plan U. S. production after trade Maple syrup U. S. production and consumption before trade 20 10 0 40 (b) The United States' PPF 50 Maple syrup Your Turn: For more practice, do related problems 2.6 and 2.7 on pages 64–65 at the end of this chapter. M02_HUBB5441_05_SE_C02.indd 48 11/4/13 12:29 PM 49 Comparative Advantage and Trade Making the Connection Comparative Advantage, Opportunity Cost, and Housework Among roommates, married couples, and other people living together, dividing up the household chores can be a source of stress. Traditionally among married couples, women did most of the housework, such as preparing meals, cleaning, and doing the ­ aundry. l In 1965, married women with children averaged about 32 hours of housework per week, while married men averaged only 4 hours. Today, women average about 18 hours of housework, while men average about 10 hours. Housework doesn’t seem to be part of buying, selling, and the usual topics of business and economics. In fact, we can use basic economic concepts to analyze housework. Consider first the most efficient way to divide up household chores. Suppose Jack and Jill need to decide how they will get the cooking and laundry done. Assume Jack has an absolute advantage over Jill in both chores, but he has a big advantage over Jill in c ­ ooking—he takes much less time to prepare very tasty meals—but is only a little faster than Jill in doing the laundry. In other words, assuming they have the same amount of time available to do housework, Jack has a comparative advantage in cooking, while Jill has a comparative advantage in doing the laundry. So rather than Jack and Jill both ­ oing some of the cooking and some of the laundry, they would be better off if d Jack ­ ollows his comparative advantage and does all the cooking, while Jill follows her f c ­ omparative ­ dvantage and does all the laundry. a Economics can also provide some insight into the decline in the number of hours spent on housework since the 1960s. Combined, men and women now spend more than 20 percent fewer hours on housework. This decline has been partly driven by technology, particularly improvements in household appliances, such as dishwashers and microwave ovens. The decline in the number of hours women devote to housework also reflects the greater job opportunities available to women today compared with the 1960s. The opportunity cost to a woman of spending time on housework and childcare is the wage she gives up by not spending that time in paid work. If a woman could work for an hour at a wage of $20 but spends that hour doing household chores, the opportunity cost of the time spent on chores is $20. As job opportunities for women and the wages those jobs pay have increased, so has the opportunity cost of doing housework. So in addition to taking advantage of improved appliances, many families have found that the cost of hiring specialists in household chores, such as cleaning services and lawn care services, is lower than the cost of the wife (or husband) performing those chores. As women’s wages have risen relative to men’s wages, the opportunity cost to women of doing housework has increased more than has the opportunity cost to men. So we would expect that in addition to women devoting fewer hours to housework, the gap between the hours women and men devote would narrow. In fact, between 1965 and 2018, the average number of hours women devote to housework declined from 32 hours per week to 18 hours. The average number of hours women devote to paid work increased from 8 hours per week to 21 hours. Of course, changes in social attitudes also help explain changes in how men and women allocate their time. But we have seen that the basic economic concepts of comparative advantage and opportunity cost provide important insights into the not-so-wonderful world of household chores. MyEconLab Video What’s the most efficient way to divide up household chores? Sources: Kim Parker and Wendy Wang, “Modern Parenthood: Roles of Moms and Dads Converge as They Balance Work and Family,” pewsocialtrends, March 13, 2018; Emily Oster, “You’re Dividing the Chores Wrong,” Slate, November 21, 2018; and Ellen Byron, “A Truce in the Chore Wars,” New York Times, December 4, 2018. Your Turn: Test your understanding by doing related problems 2.14 and 2.15 on page 65 at the end of this chapter. M02_HUBB5441_05_SE_C02.indd 49 MyEconLab Study Plan 11/4/13 12:29 PM 50 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System 2.3 Learning Objective Explain the basic idea of how a market system works. Market A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Product market A market for goods—such as computers—or services—such as medical treatment. Factor market A market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability. Factors of production The inputs used to make goods and services. The Market System We have seen that households, firms, and the government face trade-offs and incur opportunity costs because resources are scarce. We have also seen that trade allows people to specialize according to their comparative advantage. By engaging in trade, people can raise their incomes and their standard of living. Of course, trade in the modern world is much more complex than the examples we have considered so far. Trade today involves the decisions of millions of people around the world. How are the decisions of these millions of people coordinated? In the United States and most other countries, trade is carried out in markets. Markets also determine the answers to the three fundamental questions discussed in Chapter 1: What goods and services will be produced? How will the goods and services be produced? and Who will receive the goods and services produced? Recall that a market is a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Markets take many forms: They can be physical places, such as a local pizza parlor or the New York Stock Exchange, or virtual places, such as eBay or iTunes. In a market, the buyers are demanders of goods or services, and the sellers are suppliers of goods or services. Households and firms interact in two types of markets: product markets and factor markets. Product markets are markets for goods—such as computers—and services—such as medical treatment. In product markets, households are demanders and firms are suppliers. Factor markets are markets for the factors of production. Factors of production are the inputs used to make goods and services. Factors of production are divided into four broad categories: • Labor includes all types of work, from the part-time labor of teenagers working at McDonald’s to the work of senior managers in large corporations. • Capital refers to physical capital, such as computers and machine tools, that is used • • to produce other goods. Natural resources include land, water, oil, iron ore, and other raw materials (or “gifts of nature”) that are used in producing goods. An entrepreneur is someone who operates a business. Entrepreneurial ability is the ability to bring together the other factors of production to successfully produce and sell goods and services. The Circular Flow of Income Two key groups participate in markets: • A household consists of all the individuals in a home. Households are suppliers • M02_HUBB5441_05_SE_C02.indd 50 of factors of production—particularly labor—employed by firms to make goods and services. Households use the income they receive from selling the factors of production to purchase the goods and services supplied by firms. We are familiar with households as suppliers of labor because most people earn most of their income by going to work, meaning they are selling their labor services to firms in the labor market. But households own the other factors of production as well, either directly or indirectly, by owning the firms that own these resources. All firms are owned by households. Small firms, like a neighborhood restaurant, might be owned by one person. Large firms, like Apple, are owned by ­ illions of households that own shares of stock in them. When firms pay m profits to the people who own them, the firms are paying for using the ­ apital c and natural resources that are supplied to them by those owners. So, we can generalize by saying that in factor markets, households are suppliers and firms are demanders. Firms are suppliers of goods and services. Firms use the funds they receive from selling goods and services to buy or hire the factors of production needed to make the goods and services. 11/4/13 12:29 PM The Market System 51 MyEconLab Animation Figure 2.6 rv fac an tor do th s pa se the The Circular-Flow Diagram es od tio Go uc ts od en pr ym of d an to s ice Wa g er s Households n Factor markets o nd se Lab r vi ces and ap tr en l, ep ab ita ial ng sa c or, ne ur go na din tur al en od ility Sp res our ces , Product markets re Firms We can use a simple economic model called the circular-flow diagram to see how participants in markets are linked. Figure 2.6 shows that in factor markets, households supply labor and other factors of production in exchange for wages and other payments from firms. In product markets, households use the payments they earn in factor markets to purchase the goods and services supplied by firms. Firms produce these goods and services using the factors of production supplied by households. In the figure, the blue arrows show the flow of factors of production from households through factor markets to firms. The red arrows show the flow of goods and services from firms through product markets to households. The green arrows show the flow of funds from firms through factor markets to households and the flow of spending from households through product markets to firms. Like all economic models, the circular-flow diagram is a simplified version of reality. For example, Figure 2.6 leaves out the important role of government in buying goods from firms and in making payments, such as Social Security or unemployment insurance payments, to households. The figure also leaves out the roles played by banks, the stock and bond markets, and other parts of the financial system in aiding the flow of funds from lenders to borrowers. Finally, the figure does not show that some goods and services purchased by domestic households are produced in foreign countries and some goods and services produced by domestic firms are sold to foreign households. (We explore the government, the financial system, and the international sector further in later chapters.) d Despite these simplifications, the circular-flow ­ iagram in Figure 2.6 is useful for seeing how product markets, factor markets, and their participants are linked together. One of the great wonders of the market system is that it manages to successfully coordinate the independent activities of so many households and firms. MyEconLab Concept Check M02_HUBB5441_05_SE_C02.indd 51 Households and firms are linked together in a circular flow of production, income, and spending. The blue arrows show the flow of the factors of production. In factor markets, households supply labor, entrepreneurial ability, and other factors of production to firms. Firms use these factors of production to make goods and services that they supply to households in product markets. The red arrows show the flow of goods and services from firms to households. The green arrows show the flow of funds. In factor markets, households receive wages and other payments from firms in exchange for supplying the factors of production. Households use these wages and other payments to purchase goods and services from firms in product markets. Firms sell goods and services to households in product markets, and they use the funds to purchase the factors of production from households in factor markets. Circular-flow diagram A model that illustrates how participants in markets are linked. 11/4/13 12:29 PM 52 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System The Gains from Free Markets Free market A market with few government restrictions on how a good or service can be produced or sold or on how a factor of production can be employed. A free market exists when the government places few restrictions on how goods and services can be produced or sold or on how factors of production can be employed. Governments in all modern economies intervene more than is consistent with a fully free market. In that sense, we can think of the free market as being a benchmark against which we can judge actual economies. There are relatively few government restrictions on economic activities in the United States, Canada, the countries of Western Europe, Hong Kong, Singapore, and Estonia. So these countries come close to the free market benchmark. In countries such as Cuba and North Korea, the free market system has been rejected in favor of centrally planned economies with extensive government control over product and factor markets. Countries that come closest to the free market benchmark have been more successful than countries with centrally planned economies in providing their people with rising living standards. The Scottish philosopher Adam Smith is considered the father of modern economics because his book An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, was an early and very influential argument for the free market system. Smith was writing at a time when extensive government restrictions on markets were common. In many parts of Europe, the guild system prevailed. Under this system, governments would give guilds, or organizations of producers, the authority to control the production of a good. For example, the shoemakers’ guild controlled who was allowed to produce shoes, how many shoes they could produce, and what price they could charge. In France, the cloth makers’ guild even dictated the number of threads in the weave of the cloth. Smith argued that such restrictions reduced the income, or wealth, of a country and its people by restricting the quantity of goods produced. Some people at the time supported the restrictions of the guild system because it was in their financial interest to do so. If you were a member of a guild, the restrictions served to reduce the competition you faced. But other people sincerely believed that the alternative to the guild system was economic chaos. Smith argued that these people were wrong and that a country could enjoy a smoothly functioning economic system if firms were freed from guild restrictions. MyEconLab Concept Check The Market Mechanism In Smith’s day, defenders of the guild system worried that if, for instance, the shoemakers’ guild did not control shoe production, either too many or too few shoes would be produced. Smith argued that prices would do a better job of coordinating the activities of buyers and sellers than the guilds could. A key to understanding Smith’s argument is the assumption that individuals usually act in a rational, self-interested way. In particular, individuals take those actions that are most likely to make themselves better off financially. This assumption of rational, self-interested behavior underlies nearly all economic analysis. In fact, economics can be distinguished from other disciplines that study human behavior—such as sociology and psychology—by its emphasis on the assumption of self-interested behavior. Adam Smith understood—as economists today understand—that people’s motives can be complex. But when we analyze people in the act of buying and selling, the motivation of financial reward usually provides the best explanation for the actions people take. For example, suppose that a significant number of consumers switch from buying regular gasoline-powered cars to buying gasoline/electric-powered hybrid cars, such as the Toyota Prius, or all-electric cars, such as the Tesla Model S. Firms will find that they can charge relatively higher prices for hybrid cars and electric cars than they can for regular cars. The self-interest of these firms will lead them to respond to consumers’ wishes by producing more hybrid and electric cars and fewer regular cars. Or suppose that consumers decide that they want to eat less bread, pasta, and other foods that are high in carbohydrates. Then the prices firms can charge for bread and pasta will fall. M02_HUBB5441_05_SE_C02.indd 52 11/4/13 12:29 PM The Market System 53 The self-interest of firms will lead them to produce less bread and pasta, which, in fact, is what has happened over the past 10 years. Note that for the market mechanism to work in response to changes in consumers’ wants, prices must be flexible. Changes in relative prices—the price of one good or service relative to the prices of other goods or services—provide information, or a signal, to both consumers and firms. For example, during 2018, consumers worldwide increased their demand for cattle and poultry. Because corn is fed to cattle and poultry, prices for corn soared relative to prices for other crops. Many farmers in the United States received this price signal and responded by increasing the amount of corn they planted and decreasing the amount of soybeans and wheat. One Kansas farmer was quoted as saying, “It seemed to me there was $100 to $150 per acre more money in the corn than there was in the beans. That’s the kind of math that a lot of guys were using.” By 2018, the United States was experiencing record corn crops. Similarly, falling prices for DVDs or music CDs in the 2000s were a signal to movie studios and record companies to devote fewer resources to these products and more resources to making movies and music available online. In the United States today, governments at the federal, state, and local levels set or regulate the prices of only about 10 to 20 percent of goods and services. The prices of other goods and services are free to change as consumer wants change and as costs of production change. In the case where consumers want more of a product, and in the case where they want less of a product, the market system responds without a guild or the government giving orders about how much to produce or what price to charge. In a famous phrase, Smith said that firms would be led by the “invisible hand” of the market to provide consumers with what they want. Firms respond individually to changes in prices by making decisions that collectively end up satisfying the wants of consumers. MyEconLab Concept Check Making the Connection A Story of the Market System in Action: How Do You Make an iPad? Apple produces the iPad. Because Apple’s headquarters are in ­ upertino, California, it seems reasonable to assume that C iPads are also manufactured in that state. A poll by the New York Times showed that, in fact, a majority of people interviewed believed that iPads were manufactured in the United States, if not specifically in California. Although engineers at Apple designed the iPad, the company produces none of the components of the iPad, nor does it assemble the components into a finished product. Far from being produced entirely by one company in one country, the iPad requires the coordinated activities of thousands of workers and dozens of firms spread around the world. Foxconn, which is based in Taiwan, assembles the iPad in factories in Shenzhen and Chengdu, China, and Jundiai, São Paulo, Brazil, and ships them to Apple for sale in the ­ United States. Although Foxconn does final assembly, it doesn’t make any of the components and, in fact, charges Apple less than $15 for assembling each iPad. The following table lists some of the many suppliers of iPad components. Each of these suppliers in turn relies on its own suppliers. For example, Broadcom designs the touchscreen controller for the iPad and supplies it to Apple, but it does not manufacture the components of the controller or assemble them. To manufacture the components, Broadcom relies on SilTerra, based in Malaysia; SMIC, based in mainland China; and Taiwan Semiconductor Manufacturing Corporation (TSMC) and UMC, based in Taiwan. TSMC’s factories are for the most part not in Taiwan but in mainland China and Eastern Europe. To assemble the components, Broadcom uses several companies, including Amkor Technology, based in Chandler, Arizona, and STATS ChipPAC, based in Singapore. MyEconLab Video M02_HUBB5441_05_SE_C02.indd 53 The market coordinates the activities of the many people spread around the world who contribute to making an iPad. 11/4/13 12:29 PM 54 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System Firm Location of the Firm iPad Component the Firm Supplies AKM Japan Motion sensor AU Optronics Taiwan Display Broadcom United States (California) Touchscreen controller and wireless chip Cirrus Logic United States (Texas) Audio chip Corning United States (New York) Glass screen cover Elpida Japan System memory SK Hynix South Korea Flash memory Infineon Technologies Germany Semiconductors LG Electronics South Korea Display Quicomm United Kingdom Wireless section Samsung South Korea Display, flash memory, and applications processor Sharp Japan Display STMicroelectronics France/Italy Motion sensors Texas Instruments United States (Texas) Touchscreen controller Toshiba Japan Flash memory All told, an iPad contains hundreds of parts that are designed, manufactured, and assembled by firms around the world. Many of these firms are not even aware of which other firms are also producing components for the iPad. Few of the managers of these firms have met managers of the other firms or shared knowledge of how their particular components are produced. In fact, no one person from Tim Cook, the chief executive officer of Apple, on down possesses the knowledge of how to produce all the components that are assembled into an iPad. Instead, the invisible hand of the market has led these firms to contribute their knowledge and resources to the process that ultimately results in an iPad available for sale in a store in the United States. Apple has so efficiently organized the process of producing the iPad that you can order a custom iPad with a personal engraving and have it delivered from an a ­ ssembly plant in China or Brazil to your doorstep in the United States in as little as three days. Sources: Marjorie Connelly, “Poll Finds Consumer Confusion on Where Apple Devices Are Made,” New York Times, ­ anuary 25, 2018; Andrew Rassweiler, “New iPad 32GB + 4G Carries $364.35 Bill of Materials,” iSuppli, J March 16, 2018; and Arik Hesseldahl, “Teardown Shows Apple iPad Mini Costs at Least $188 to Build,” allthingsd, N ­ ovember 3, 2018. MyEconLab Study Plan Your Turn: Test your understanding by doing related problems 3.8 and 3.9 on page 66 at the end of this chapter. The Role of the Entrepreneur Entrepreneur Someone who operates a business, bringing together the factors of production—labor, capital, and natural resources—to produce goods and services. M02_HUBB5441_05_SE_C02.indd 54 Entrepreneurs are central to the working of the market system. An entrepreneur is someone who operates a business. Entrepreneurs first determine what goods and services they believe consumers want and then decide how to produce those goods and services most profitably, using the available factors of production—labor, capital, and natural resources. Successful entrepreneurs are able to search out opportunities to provide new goods and services. Frequently these opportunities are created by new technology. Consumers and existing businesses often do not at first realize that the new technology makes new products feasible. For example, even after the development of the internal combustion engine had made automobiles practicable, Henry Ford remarked, “If I had asked my customers what they wanted, they would have said a faster horse.” Because consumers often cannot evaluate a new product before it exists, some of the most successful entrepreneurs, such as the late Steve Jobs 11/4/13 12:29 PM The Market System 55 of Apple, rarely use focus groups, or meetings with consumers in which the consumers are asked what new products they would like to see. Instead, entrepreneurs think of products that consumers may not even realize they need, such as, in Jobs’s case, an MP3 player—iPod—or a tablet computer—iPad. Entrepreneurs are important to the economy because they are often responsible for making new products widely a ­ vailable to consumers, as Henry Ford did with the automobile and Steve Jobs did with the iPod. The firms entrepreneurs found are typically small at first, as Apple and Ford were. Table 2.3 lists some of the important products entrepreneurs at small firms introduced during the twentieth century. Entrepreneurs put their own funds at risk when they start businesses. If they are wrong about what consumers want or about the best way to produce goods and services, they can lose those funds. In fact, it is not unusual for entrepreneurs who eventually achieve great success to fail at first. For instance, early in their careers, both Henry Ford and Sakichi Toyoda, who eventually founded the Toyota Motor Corporation, started companies that quickly failed. Research by Richard Freeman of Harvard University has shown that a typical entrepreneur earns less than an employee at a large firm who has the same education and other characteristics. Few entrepreneurs make the fortunes earned by Mark Zuckerberg, Steve Jobs, or Bill Gates. Product Inventor Air conditioning William Haviland Carrier Airplane Orville and Wilbur Wright Automobile, mass produced Henry Ford Biomagnetic imaging Raymond Damadian Biosynthetic insulin Herbert Boyer DNA fingerprinting Alec Jeffries FM radio Edwin Howard Armstrong Helicopter Igor Sikorsky High-resolution CAT scanner Robert Ledley Hydraulic brake Malcolm Lockheed Integrated circuit Jack Kilby Microprocessor Ted Hoff Optical scanner Everett Franklin Lindquist Oral contraceptives Carl Djerassi Overnight delivery service Fred Smith Personal computer Steve Jobs and Steve Wozniak Quick-frozen foods Clarence Birdseye Safety razor King Gillette Soft contact lens Kevin Tuohy Solid fuel rocket engine Robert Goddard Supercomputer Seymour Cray Vacuum tube Philo Farnsworth Zipper Table 2.3 Gideon Sundback Important Products Introduced by Entrepreneurs at Small Firms Source: William J. Baumol, The Microtheory of Innovative Entrepreneurship, Princeton, NJ: Princeton University Press, 2018, and var ious sources. Note that the person who first commercially developed a particular product is sometimes disputed by historians. M02_HUBB5441_05_SE_C02.indd 55 11/4/13 12:29 PM 56 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System Entrepreneurs make a vital contribution to economic growth through their roles in responding to consumer demand and introducing new products. Government policies ­ that encourage entrepreneurship are also likely to increase economic growth and raise the standard of living. In the next section, we consider the legal framework required for a successful market in which entrepreneurs can succeed. MyEconLab Concept Check The Legal Basis of a Successful Market System In a free market, government does not restrict how firms produce and sell goods and services or how they employ factors of production. But the absence of government intervention is not enough for the market system to work well. Government has to take active steps to provide a legal environment that will allow markets to operate efficiently. Protection of Private Property For the market system to work well, individu - Property rights The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. M02_HUBB5441_05_SE_C02.indd 56 als must be willing to take risks. Someone with $250,000 can be cautious and keep it safely in a bank—or even in cash, if the person doesn’t trust banks. But the market system won’t work unless a significant number of people are willing to risk their funds by investing them in businesses. Investing in businesses is risky in any country. Many businesses fail every year in the United States and other high-income countries. But in high-income countries, someone who starts a new business or invests in an existing business doesn’t have to worry that the government, the military, or criminal gangs might decide to seize the business or demand payments for not destroying the business. Unfortunately, in many poor countries, owners of businesses are not well protected from having their businesses seized by the government or from having their profits taken by criminals. Where these problems exist, opening a business can be e ­ xtremely risky. Cash can be concealed easily, but a business is difficult to conceal or move. Property rights are the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. Property can be tangible, physical property, such as a store or factory. Property can also be intangible, such as the right to an idea. Two amendments to the U. S. Constitution guarantee property rights: The Fifth Amendment states that the federal government shall not deprive any person “of life, liberty, or property, without due process of law.” The Fourteenth Amendment extends this guarantee to the actions of state governments: “No state … shall deprive any person of life, liberty, or property, without due process of law.” Similar guarantees exist in every high-income country. Unfortunately, in many developing countries, such guarantees do not exist or are poorly enforced. In any modern economy, intellectual property rights are very important. Intellectual property includes books, films, software, and ideas for new products or new ways of producing products. To protect intellectual property, the federal government grants a patent that gives an inventor—often a firm—the exclusive right to produce and sell a new product for a period of 20 years from the date the patent was filed. For instance, because Microsoft has a patent on the Windows operating system, other firms cannot sell their own versions of Windows. The government grants patents to encourage firms to spend money on the research and development necessary to create new products. If other companies could freely copy Windows, Microsoft would not have spent the funds necessary to develop it. Just as a new product or a new method of making a product receives patent protection, new books, films, and software receive copyright protection. Under U. S. law, the creator of a book, film, or piece of music has the exclusive right to use the creation during the creator’s lifetime. The creator’s heirs retain this exclusive right for 50 years after the death of the creator. In providing copyright protection for only a limited time, Congress provides economic incentives to creators while eventually—after the period of copyright has ended—allowing the creators’ works to be freely available. The longer the 11/4/13 12:29 PM The Market System 57 period of copyright, the more likely it is that some consumers will not gain access to the copyrighted work and the longer the wait before others can use the copyrighted work in their own work, for instance, by writing a sequel to a copyrighted book. Making Who Owns The Wizard of Oz? The U. S. Congress provides copyright protection to authors to give them an economic incentive to invest the time and effort required to write a book. While a book is under copyright, only MyEconLab Video the author—or whoever the author sells the copyright to—can legally publish a paper or digital copy of the book. Once the copyright expires, however, the book enters the public domain and anyone is free to publish the book. Copies of classic books, such as Huckleberry Finn or Oliver Twist, are usually available from many publishers. L. Frank Baum wrote The Wonderful Wizard of Oz in 1900. The copyright on the book expired years ago and many publishers now sell their own ­ ersions v of the book. While these publishers can’t claim copyright of Baum’s words, because those words are in the public domain, they can claim copyright on a new design of the book or on any new illustrations they create. A similar situation exists with the famous 1939 MGM film The Wizard of Oz. Warner Brothers, which now owns the copyright to the film, does not have a legal right to any of the words or incidents in the film that were taken directly from Baum’s book. However, Warner Brothers does have a copyright on any dialogue or incidents that were written specifically for the film as well as the design of the film sets and the actors’ costumes. Warner Brothers was aggressive in a defending its copyright when Walt Disney ­ nnounced that it was making a film called Oz The Great and P ­ owerful. As a copyright lawyer put it: “The MGM film presented the story in a c ­ ertain way, and it’s those things—the embellishments, the creative decisions—that Disney cannot use.” Disney had to be careful even in minor details to avoid violating Warner ­ Brothers’ copyright. For example, it made the green makeup of the Wicked Witch of the West a different shade from that in the earlier film. Disney also changed the location of the Yellow Brick Road and the name of Munchkin Country to avoid infringing on Warner D Brothers’ copyright. Shortly before the film was released in early 2018, ­ isney’s lawyers decided that the hairstyles of some of the Munchkins in the completed film had to be digitally altered because they appeared too close to the hairstyles in the earlier film. Most economists believe that copyrights provide needed protection for authors and creators of movies or other artistic works. However, the roadblocks Warner Brothers placed in the way of Disney making a new Oz film show that copyrights may deter others from producing new work that might infringe on a copyrighted work. the Connection The Wonderful Wizard of Oz is a classic book from 1900 that became a classic film in 1939. A remake of the film in 2018 raised copyright issues. Sources: Brooks Barnes, “We Aren’t in the Old Kansas, Toto,” New York Times, February 28, 2018; and Eriq Gardner, “Disney, Warner Bros. Fighting Over ‘Wizard of Oz’ Trademarks,” Hollywood Reporter, February 12, 2018. Your Turn: Test your understanding by doing related problem 3.17 on page 67 at the end of this MyEconLab Study Plan chapter. M02_HUBB5441_05_SE_C02.indd 57 11/4/13 12:29 PM 58 C h a p t e r 2 Trade-offs, Comparative Advantage, and the Market System Enforcement of Contracts and Property Rights Business activity ­ ften o MyEconLab Study Plan i ­ nvolves someone agreeing to carry out some action in the future. For example, you may borrow $20,000 to buy a car and promise the bank—by signing a loan c ­ ontract—that you will pay back the money over the next five years. Or Facebook may sign a licensing agreement with a small technology company, agreeing to use that company’s technology for a period of several years in return for a fee. Usually these agreements take the form of legal contracts. For the market system to work, businesses and individuals have to rely on these contracts being carried out. If one party to a legal contract does not fulfill its obligations—perhaps the small company had promised Facebook exclusive use of its technology but then began licensing it to other ­ ompanies—the other party can go to court to have the agreement enforced. c Similarly, if property owners in the United States believe that the federal or state g ­ overnment has violated their rights under the Fifth or Fourteenth Amendments, they can go to court to have their rights enforced. But going to court to enforce a contract or private property rights will be successful only if the court system is independent and judges are able to make impartial decisions on the basis of the law. In the United States and other high-income countries, the court systems have enough independence from other parts of the government and enough protection from intimidation by outside forces—such as criminal gangs—that they are able to make their decisions based on the law. In many developing countries, the court systems lack this independence and will not provide a remedy if the government violates private property rights or if a person with powerful political connections decides to violate a business contract. If property rights are not well enforced, fewer goods and services will be produced. This reduces economic efficiency, leaving the economy inside its production possibilities frontier. MyEconLab Concept Check Continued from page 37 Economics in Your Life The Trade-offs When You Buy a Car At the beginning of the chapter, we asked you to think about two questions: With respect to traditional gasoline-powered cars, what is the relationship between safety and fuel efficiency? and Under what circumstances would it be possible for automobile manufacturers to make cars safer and more fuel efficient? To answer the first question, you have to recognize that there is a trade-off between safety and fuel efficiency. With the technology available at any particular time, an automobile manufacturer can increase fuel efficiency by making a car smaller and lighter. But driving a lighter car increases your chances of being injured if you have an accident. The trade-off between safety and fuel efficiency would look much like the relationship in Figure 2.1 on page 39. To get more of both safety and gas mileage, automobile makers would have to discover new technologies that allow them to make cars lighter and safer at the same time. Such new technologies would make points like G in Figure 2.1 attainable. M02_HUBB5441_05_SE_C02.indd 58 06/11/13 2:19 AM Conclusion 59 Conclusion We have seen that by trading in markets, people are able to specialize and pursue their comparative advantage. Trading on the basis of comparative advantage makes all participants in trade better off. The key role of markets is to facilitate trade. In fact, the market system is a very effective means of coordinating the decisions of millions of consumers, workers, and firms. At the center of the market system is the consumer. To be successful, firms must respond to the desires of consumers. These desires are communicated to firms through prices. To explore how markets work, we must study the behavior of consumers and firms. We continue this exploration of markets in Chapter 3, when we develop the model of demand and supply. Before moving on to Chapter 3, read An Inside Look on the next page to explore the trade-offs managers face at luxury carmaker Mercedes-Benz and why the company chose to partner with Tesla Motors to develop electric-vehicle components. M02_HUBB5441_05_SE_C02.indd 59 11/4/13 12:29 PM An Inside Look What’s on the Horizon at Mercedes-Benz? Car and Driv er Mercedes-Benz Execs Talk 13 New Models, Electric Cars, and Hybrid AMGs Mercedes-Benz has never had a stronger first quarter in the United States than it has had in 2018, but the German automaker isn’t about to slow down. The company is taking strides to secure its position over the long term and to bolster its global sales with 13 all-new new models by 2020. These vehicles aren’t just refreshes and redesigns; the Stuttgart-based marque will introduce 13 new nameplates—vehicles without a predecessor. We know there will be the front-drive-based GLA-class crossover and the S-class will add coupe and convertible variants, but the bulk of the plan remains a mystery. Hoping to fill in some of the unknowns, we sat down with four of the most influential executives at Mercedes-Benz: Thomas Weber, head of R&D; Dieter Zetsche, Daimler chairman and head of Mercedes-Benz cars; Jörg Prigl, vice president of small-car development; and Ola Källenius, chairman of MercedesBenz AMG. Here’s what they had to say about the future of Mercedes: Car and Driver [C/D]: We’re struggling to find 13 obvious holes in the Mercedes-Benz lineup. What kinds of vehicles are coming? Should we expect Mercedes versions of BMW’s Gran Turismos? Thomas Weber: To build such a vehicle is easy. To be successful is the name of the game. You also must the packaging and the battery manbe careful not to say a current trend agement. Tesla provides the complete is a trend forever. We will certainly powertrain for the B-class Electric add long-wheelbase models targetDrive, but the calibration is split being the Asian markets. As we look at tween Tesla and Mercedes-Benz. these new models, we need to beat C/D: The Geneva auto show was our competitors in three areas: design, dominated by a pair of hybrid superpowertrains, and environmental and cars, the McLaren P1 and the Ferrari safety technologies. LaFerrari. At what point will tightenC/D: Is there any concern that ing environmental regulations force a the $30,825 CLA250 might dilute the AMG to adopt hybrid powertrains? brand image in the U. S. or cannibalOla Källenius: The SLS AMG ize C-class sales? Electric Drive is a glimpse of the fuDieter Zetsche: Our more-mature, ture, but we took two steps forward more-affluent customers are very good to take one step back. Hybrids are the to us. At the same time, the A-class next logical step, likely in five to seven has an average age drop of 10 years years. For now, with conventional gas [in Europe]. It’s all about striking the measures we can reduce emissions anright balance. The new S-class will other 20 percent. The immediate fumove into Rolls-Royce Ghost territure is relatively clear. Downsize and tory. Just as we introduce small cars, direct injection is where combustion we keep the light shining on the is headed, but it is inevitable that we brand. will have to electrify these cars. Jörg Prigl: If we saw that as a c C/D: Why isn’t Mercedes makrisk, we shouldn’t have done the CLA. ing a big investment in carbon fiber We are not fighting for the loyal cuslike BMW and the Volkswagen Group tomers we have. have? C/D: Electric vehicles have failed Källenius: Carbon fiber is for a b to take off in the U. S. Why bring the hypercar. Taking out weight is a deelectric B-class to market? cathlon. You need to work with all the Prigl: Technology leadership in materials. Right now, the industry is at a potential future drivetrain is a must a peak; every new car going forward for us. The partnership with Tesla will will shave off weight …. help us speed up and beat the compeSource: Eric Tingwall, “Mercedes-Benz Execs tition. If you believe you can do this Talk 13 New Models, Electric Cars, and Hybrid alone as an automaker, you will fail. AMGs,” Car and Driver, April 10, 2018. The battery cell should not be done by the OEM [Auto Parts]. There should be huge competition among suppliers to get the cell right. The specific know-how for the automaker is in 60 M02_HUBB5441_05_SE_C02.indd 60 11/4/13 12:29 PM Key Points in the Article Mercedes is planning 13 new models by 2020, including a new crossover vehicle; new variations of its S-class automobile; redeveloped entry-level vehicles; and the introduction of an electric car. With these M new models, the managers at ­ ercedes are making choices about how to use new designs, upgraded powertrains, and advances in technology to deal with environmental and safety concerns. In addition, these managers have also chosen to partner with Tesla Motors to develop electricvehicle components. Making the optimal choices will be important for Mercedes to remain one of the most competitive and successful high-end automobile manufacturers in the world. Analyzing the News Automobile manufacturers must decide what type of cars to bring to market. Mercedes has two challenges in introducing a new entry-level car in the United States. First, for a high-end manufacturer like Mercedes, image is very important, and even the perception that the company is catering to a lower-income consumer can be damaging. Second, M ­ ercedes does not want to sacrifice sales of its more profitable C-class models for these new lower-price A-class models. Suppose Mercedes produced only A-class and C-class vehicles and in 2018 had the a capability of producing a total of 30,000 vehicles. This capacity is represented by PPF 2018 in the figure below. This curve shows that Mercedes would have to sacrifice production (and therefore sales) of one type of vehicle to produce more of the other. The executives at Mercedes expect ­ their market to continue to grow, and they do not believe that introducing the new A ­ - class model will take sales away from the C-class. Mercedes will therefore have to produce a larger number of automobiles, which is represented by PPF 2020 in the figure. Despite disappointing sales figures for b electric vehicles, Mercedes has decided to introduce its electric B-class model in the U. S. market. Mercedes believes that the market for electric vehicles will grow, and it needs to be at the forefront of development in order to beat the competition. Mercedes faced a trade-off when deciding on the development of its electric vehicle. Rather than build this vehicle completely in-house, Mercedes chose to partner with Tesla, believing that Tesla’s experience in producing electric vehicles would be advantageous for both companies and make the B-class a success. In choosing to take advantage of Tesla’s expertise and technology, Mercedes gave up some level of control, but it chose this path believing it would increase the potential for building a vehicle that would have strong sales. As emissions standards continue to tighten and gas-mileage requirements continue to grow, lighter-weight cars will become a bigger part of our future. One decision Mercedes has made is to not invest heavily in lightweight carbon fiber for use in production, but rather to reduce the weight of ­ all materials over the next several years. Here again, Mercedes faced a trade-off between investing in one specific technology and waiting to see what the future holds in terms of ­ other lighter-weight production options that it can use in its manufacturing. c Thinking Critically 1. Suppose that from 2018 to 2020, the resources Mercedes-Benz uses to produce its automobiles remain constant, while improvements in technology in 2020 allow Mercedes to produce the additional quantity of A-class models shown in the figure below, but no additional C-class models. Draw a graph that illustrates this technology change. Be sure to show both the 2018 and new 2020 PPFs. What is the opportunity cost to Mercedes-Benz of producing one Cclass model in 2018? In 2020? 2. Assume that the figure below accurately represents Mercedes-Benz’s PPFs for 2018 and 2020, and that in 2020 it has customer orders for 35,000 A-class m ­ odels and 20,000 C-class models. E ­ xplain whether Mercedes can fill all of these orders. A-class (thousands) 45 2018 production possibilities frontier, showing the trade-off between producing A-class and C-class models The 2020 production possibilities frontier represents an increase in production capacity for both A-class and C-class models. 30 PPF2018 0 PPF2020 30 45 C-class (thousands) Choosing between producing a Mercedes A-class model and producing a C-class model. 61 M02_HUBB5441_05_SE_C02.indd 61 11/4/13 12:29 PM 62 C h a p t e r 2 Trade-offs, Comparative Advantage, and the Market System Chapter Summary and Problems Key Terms Absolute advantage, p. 45 Entrepreneur, p. 54 Market, p. 50 Property rights, p. 56 Circular-flow diagram, p. 51 Factor market, p. 50 Opportunity cost, p. 39 Scarcity, p. 38 Comparative advantage, p. 46 Factors of production, p. 50 Product market, p. 50 Trade, p. 43 Economic growth, p. 43 Free market, p. 52 Production possibilities frontier (PPF), p. 38 2.1 Production Possibilities Frontiers and Opportunity Costs, pages 38–43 LEARNING OBJECTIVE: Use a production possibilities frontier to analyze opportunity costs and trade-offs. Summary The production possibilities frontier (PPF) is a curve that shows the maximum attainable combinations of two products that may be produced with available resources. The PPF is used to illustrate the trade-offs that arise from scarcity. Points on the frontier are technically efficient. Points inside the frontier are inefficient, and points outside the frontier are unattainable. The opportunity cost of any activity is the highest-valued alternative that must be given up to engage in that activity. Because of increasing marginal opportunity costs, production possibilities frontiers are usually bowed out rather than straight lines. This illustrates the important economic concept that the more resources that are already devoted to any activity, the smaller the payoff from devoting additional resources to that activity is likely to be. Economic growth is illustrated by shifting a production possibilities frontier outward. MyEconLab Visit myeconlab to complete these exercises online and get instant feedback. Review Questions 1.1 What do economists mean by scarcity? Can you think of anything that is not scarce according to the economic definition? 1.2 What is a production possibilities frontier? How can we show efficiency on a production possibilities frontier? How can we show inefficiency? What causes a production possibilities frontier to shift outward? 1.3 What does increasing marginal opportunity costs mean? What are the implications of this idea for the shape of the production possibilities frontier? Problems and Applications 1.4 Draw a production possibilities frontier that shows the trade-off between the production of cotton and the production of soybeans. ا. Show the effect that a prolonged drought would have on the initial production possibilities frontier. ب. Suppose genetic modification makes soybeans resistant to insects, allowing yields to double. Show the effect of this technological change on the initial production possibilities frontier. M02_HUBB5441_05_SE_C02.indd 62 1.5 [Related to the Chapter Opener on page 37] One of the trade-offs Tesla faces is between safety and the maximum range someone can drive an all-electric car before having to recharge it. For example, adding steel to a car makes it safer but also heavier, which results in fewer miles between recharges. Draw a hypothetical production possibilities frontier that Tesla engineers face that shows this trade-off. 1.6 [Related to Chapter Opener on page 37] According to an article on CNNMoney, in May 2018 CEO Elon Musk of Tesla Motors announced plans for a large expansion of Tesla’s network of supercharger stations by the end of the year. The network of supercharger stations will stretch from Los Angeles to New York and cover most metropolitan areas in the United States and Supercharger stations allow the all-electric cars to be recharged in about an hour. Musk stated that: “It is very important to address this issue of long-distance travel.” a. Why is it important for Tesla Motors to address the issue of long-distance travel? ب. Tesla Motors, like other firms, faces many strategic decisions and trade-offs. What would be the opportunity cost to Tesla Motors to expanding the supercharger networks? Source: Chris Isidore, “Tesla Tripling Supercharger Network for LA to NY Trip,” CNNMoney, May 31, 2018. 1.7 Suppose you win free tickets to a movie plus all you can eat at the snack bar for free. Would there be a cost to you to attend this movie? شرح. 1.8 Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. ا. Use a production possibilities frontier graph to illustrate the trade-off to an economy between producing consumption goods and producing capital goods. Is it likely that the production possibilities frontier in this situation will be a straight line (as in Figure 2.1 on page 39) or bowed out (as in Figure 2.2 on page 42)? Briefly explain. ب. Suppose a technological change occurs that has a favorable effect on the production of capital goods but not consumption goods. Show the effect on the production possibilities frontier. 11/4/13 1:19 PM Chapter Summary and Problems c. Suppose that Lichtenstein and Luxembourg currently have identical production possibilities frontiers but that Lichtenstein devotes only 5 percent of its resources to producing capital goods over each of the next 10 years, while Luxembourg devotes 30 percent. Which country is likely to experience more rapid economic growth in the future? Illustrate using a production possibilities frontier graph. Your graph should include production possibilities frontiers for Lichtenstein and Luxembourg today and in 10 years. 1.9 Use the following production possibilities frontier for a country to answer the questions. Capital goods B E C D A Consumption goods 0 a. Which point or points are unattainable? Briefly explain why. ب. Which point or points are efficient? Briefly explain why. ج. Which point or points are inefficient? Briefly explain why. د. At which point is the country’s future growth rate likely to be the highest? Briefly explain why. 1.10 [Related to Solved Problem 2.1 on page 40] You have exams in economics and chemistry coming up, and you have 5 hours available for studying. The following table shows the trade-offs you face in allocating the time you will spend in studying each subject: Hours Spent Studying Midterm Score Choice Economics Chemistry Economics Chemistry A 5 0 95 70 B 4 1 93 78 C 2 90 84 2 3 86 88 E 1 4 81 90 F 3 D 0 5 75 91 a. Use the data in the table to draw a production possibilities frontier graph. Label the vertical axis “Score on economics exam,” and label the horizontal axis “Score on chemistry exam.” Make sure to label the values where your production possibilities frontier intersects the vertical and horizontal axes. M02_HUBB5441_05_SE_C02.indd 63 63 b. Label the points representing choice C and choice D. If you are at choice C, what is your opportunity cost of increasing your chemistry score by 4 points? ج. Under what circumstances would choice A be a ­ sensible choice? 1.11 Suppose the U. S. president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. He asks you, one of his economic advisors, to prepare a report discussing the relevant factors he should consider. Use the concepts of opportunity cost and trade-offs to discuss some of the main issues you would deal with in your report. 1.12 Suppose that the federal government is deciding which of two cancer treatment therapies it will allow Medicare to pay for (assuming that only one treatment therapy will be funded): Therapy A, which will prolong the average life span of patients receiving the treatment by 24 months and will cost $750,000 per patient treated, or therapy B, which will prolong the average life span of patients receiving the treatment by 20 months and will cost $25,000 per patient treated. What factors should the federal government take into consideration in making its decision? 1.13 Lawrence Summers served as secretary of the Treasury in the Clinton administration from 1999 to 2001 and as director of the National Economic Council in the Obama administration from 2009 to 2018. He has been quoted as giving the following defense of the economic approach: There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don’t think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs. Would it be more ethical to reduce pollution without worrying about the cost, or by taking the cost into account? Briefly explain. Source: David Wessel, “Precepts from Professor Summers,” Wall Street Journal, October 17, 2002. 1.14 In The Wonderful Wizard of Oz and his other books about the Land of Oz, L. Frank Baum observed that if people’s wants were limited enough, most goods would not be scarce. According to Baum, this was the case in Oz: There were no poor people in the Land of Oz, because there was no such thing as money…. Each person was given freely by his neighbors whatever he required for his use, which is as much as anyone may reasonably desire. Some tilled the lands and raised great crops of grain, which was divided equally among the whole population, so that all had enough. There were many tailors and dressmakers and shoemakers and the like, who made things that any who desired them might wear. Likewise there were jewelers who made ornaments for the person, which pleased and beautified the people, and these ornaments also were free to those who asked for them. Each man and woman, no 11/4/13 12:29 PM 64 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System matter what he or she produced for the good of the community, was supplied by the neighbors with food and clothing and a house and furniture and ornaments and games. If by chance the supply ever ran short, more was taken from the great storehouses of the Ruler, which were afterward filled up again when there was more of any article than people needed… . 2.2 You will know, by what I have told you here, that the Land of Oz was a remarkable country. I do not suppose such an arrangement would be practical with us. Do you agree with Baum that the economic system in Oz wouldn’t work in the contemporary United States? Briefly explain why or why not. Source: L. Frank Baum, The Emerald City of Oz, 1910, pp. 30–31. Comparative Advantage and Trade, pages 43–49 LEARNING OBJECTIVE: Describe comparative advantage and explain how it serves as the basis for trade. Summary lumberjack boots, as shown in the following production possibilities frontiers: Fundamentally, markets are about trade, which is the act of buying or selling. People trade on the basis of comparative advantage. An individual, a firm, or a country has a comparative advantage in producing a good or service if it can produce the good or service at the lowest opportunity cost. People are usually better off specializing in the activity for which they have a comparative advantage and trading for the other goods and services they need. It is important not to confuse comparative advantage with absolute advantage. An individual, a firm, or a country has an absolute advantage in producing a good or service if it can produce more of that good or service using the same amount of resources. It is possible to have an absolute advantage in producing a good or service without having a comparative advantage. United States Shirts Canada Shirts 12 6 3 3 MyEconLab Visit myeconlab to complete these exercises online and get instant feedback. Review Questions 2.1 What is absolute advantage? What is comparative advantage? Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? Briefly explain. 2.2 What is the basis for trade: absolute advantage or comparative advantage? How can an individual or a country gain from specialization and trade? Problems and Applications 2.3 Look again at the information in Figure 2.4 on page 44. Choose a rate of trading cherries for apples different from the rate used in the text (15 pounds of cherries for 10 pounds of apples) that will allow you and your neighbor to benefit from trading. Prepare a table like Table 2.1 on page 46 to illustrate your answer. 2.4 Using the same amount of resources, the United States and Canada can both produce lumberjack shirts and M02_HUBB5441_05_SE_C02.indd 64 0 3 4 Boots 0 3 6 Boots a. Who has a comparative advantage in producing lumberjack boots? Who has a comparative advantage in producing lumberjack shirts? Explain your reasoning. ب. Does either country have an absolute advantage in producing both goods? شرح. ج. Suppose that both countries are currently producing three pairs of boots and three shirts. Show that both can be better off if they each specialize in producing one good and then trade for the other. 2.5 [Related to Don’t Let This Happen to You on page 47] In the 1950s, the economist Bela Balassa compared 28 manufacturing industries in the United States and ­ ritain. B In every one of the 28 industries, Balassa found that the United States had an absolute advantage. In these c ­ ircumstances, would there have been any gain to the United States from importing any of these products from Britain? شرح. 2.6 [Related to Solved Problem 2.2 on page 47] Suppose Iran and Iraq both produce oil and olive oil, which are sold for the same prices in both countries. The following table shows the combinations of both goods that each country 11/4/13 12:29 PM Chapter Summary and Problems can produce in a day, measured in thousands of barrels, using the same amounts of capital and labor: Iraq Iran Oil Olive oil Oil 0 8 0 4 2 6 1 3 4 4 2 2 Olive Oil 6 2 3 1 8 0 4 0 a. Who has the comparative advantage in producing oil? شرح. ب. Can these two countries gain from trading oil and olive oil? شرح. 2.7 [Related to Solved Problem 2.2 on page 47] Suppose that France and Germany both produce schnitzel and wine. The following table shows combinations of the goods that each country can produce in a day: 2.11 France 2.12 Germany Wine (bottles) Schnitzel (pounds) Wine (bottles) Schnitzel (pounds) 0 8 0 15 1 6 1 12 2 4 2 9 3 2 3 6 4 0 4 3 5 0 a. Who has a comparative advantage in producing wine? Who has a comparative advantage in producing schnitzel? ب. Suppose that France is currently producing 1 bottle of wine and 6 pounds of schnitzel, and Germany is currently producing 3 bottles of wine and 6 pounds of schnitzel. Demonstrate that France and Germany can both be better off if they specialize in producing only one good and then trade for the other. 2.8 Can an individual or a country produce beyond its production possibilities frontier? Can an individual or a country consume beyond its production possibilities frontier? شرح. 2.9 If Nicaragua can produce with the same amount of resources twice as much coffee as Columbia, explain how Columbia could have a comparative advantage in producing coffee. 2.10 Imagine that the next time the Indianapolis Colts play the New England Patriots at Lucas Oil Stadium in M02_HUBB5441_05_SE_C02.indd 65 2.13 2.14 65 Indianapolis, Colts star quarterback Andrew Luck has a temporary lack of judgment and plans to sell Colts memorabilia during the game because he realizes that he can sell five times more Colts products than any other player. Likewise, imagine that you are a creative and effective manager at work and that you tell your employees that during the next six months, you plan to clean the offices because you can clean five times better than the cleaning staff. What error in judgment are both Andrew and you making? Why shouldn’t Andrew and you do what you are better than anyone else at doing? Is specialization and trade between individuals and countries more about having a job or about obtaining a higher standard of living? Individually, if you go from a situation of not trading with others (you produce everything yourself) to a situation of trading with others, do you still have a job? Does your standard of living increase? Likewise, if a country goes from not trading with other countries to trading with other countries, does it still have jobs? Does its standard of living increase? In colonial America, the population was spread thinly over a large area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a result, most of the free population lived on small farms, where they not only grew their own food but also usually made their own clothes and very rarely bought or sold anything for money. Explain why the incomes of these farmers were likely to rise as transportation costs fell. Use the concept of comparative advantage in your answer. During the 1928 presidential election campaign, Herbert Hoover, the Republican candidate, argued that the United States should import only products that could not be produced here. Do you believe that this would be a good policy? شرح. [Related to the Making the Connection on page 49] In discussing dividing up household chores, Emily ­ ster, O an economist at the University of Chicago, a dvises ­ that: “No, you shouldn’t always unload the dishwasher b ­ ecause you’re better at it.” If you are better at unloading the dishwasher, why shouldn’t you be the one to ­ unload it? Source: Emily Oster, “Your’re Dividing the Chores Wrong,” Slate, N ­ ovember 21, 2018. 2.15 [Related to the Making the Connection on page 49] According to the U. S. Bureau of Labor Statistics, the amount of time men devote to housework has been increasing, while the amount of time women devote to housework has been decreasing. Briefly explain whether there is an economic explanation for these trends. Source: U. S. Bureau of Labor Statistics, American Time Use Survey. 11/4/13 12:29 PM 66 2.3 C h a p te r 2 Trade-offs, Comparative Advantage, and the Market System The Market System, pages 50–58 LEARNING OBJECTIVE: Explain the basic idea of how a market system works. Summary A market is a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Product markets are markets for goods and services, such as computers and medical treatment. Factor markets are markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability. A circular-flow diagram shows how participants in product markets and factor markets are linked. Adam Smith argued in his 1776 book The Wealth of N ­ ations that in a free market, where the government does not control the production of goods and services, changes in prices lead firms to produce the goods and services most desired by c ­ onsumers. If consumers demand more of a good, its price will rise. Firms respond to rising prices by increasing production. If consumers demand less of a good, its price will fall. Firms respond to falling prices by producing less of a good. An entrepreneur is someone who operates a business. In the market system, entrepreneurs are responsible for organizing the production of goods and services. The market system will work well only if there is protection for property rights, which are the rights of individuals and firms to use their property. MyEconLab Visit myeconlab to complete these exercises online and get instant feedback. Review Questions 3.1 What is a circular-flow diagram, and what does it demonstrate? 3.2 What are the two main categories of participants in markets? Which participants are of greatest importance in determining what goods and services are produced? 3.3 What is a free market? In what ways does a free market economy differ from a centrally planned economy? 3.4 What is an entrepreneur? Why do entrepreneurs play a key role in a market system? 3.5 Under what circumstances are firms likely to produce more of a good or service? Under what circumstances are firms likely to produce less of a good or service? 3.6 What are private property rights? What role do they play in the working of a market system? Why are independent courts important for a well-functioning economy? Problems and Applications 3.7 Identify whether each of the following transactions will take place in the factor market or in the product market and whether households or firms are supplying the good or service or demanding the good or service: a. George buys a Tesla Model S. b. Tesla increases employment at its Fremont plant. ج. George works 20 hours per week at McDonald’s. د. George sells the land he owns to McDonald’s so that it can build a new restaurant. 3.8 [Related to the Making the Connection on page 53] In The Wealth of Nations, Adam Smith wrote the following (Book I, Chapter II): “It is not from the benevolence M02_HUBB5441_05_SE_C02.indd 66 of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Briefly discuss what he meant by this. 3.9 [Related to the Making the Connection on page 53] According to an article in the Wall Street Journal, the parts contained in the BlackBerry Torch smartphone include a power management chip made by Texas Instruments (United States); a memory chip made by Samsung (South Korea); a GPS receiver made by CSR (United ­ ingdom); K a radio frequency (RF) transceiver made by Dialog S ­ emiconductor (Germany); an RF transceiver made by Renesas (Japan); an application and communications processor made by Marvell (United States); a video image processor made by STMicroelectronics (Switzerland); and plastic and stamped metal parts made by several firms in China. A firm in Mexico carries out final assembly of the Torch before it is shipped to BlackBerry for sale in the United States and other countries. Is it necessary for the managers in all these firms to know how the components of the Torch are manufactured and how the components are assembled into a smartphone? Is it necessary for the chief executive officer (CEO) of BlackBerry to know this information? Briefly explain. Source: Jennifer Valentino-DeVries and Phred Dvorak, “Piece by Piece: The Suppliers Behind the New BlackBerry Torch Smartphone,” Wall Street Journal, August 16, 2018. 3.10 In many parts of Europe during the mid-1770s, governments gave guilds, or organizations of producers, the authority to control who was allowed to produce a good, the amount of the good produced, and the price charged for the good. Would you expect more competition among producers in a guild system or in a market system? Was the consumer or the producer at the center of the guild system, and which is at the center of the market system? How would the two systems compare over time in terms of innovation of new products and technologies? 3.11 In a speech at the New York University Law School, Federal Reserve Chairman Ben Bernanke stated: Writing in the eighteenth century, Adam Smith conceived of the free-market system as an “invisible hand” that harnesses the pursuit of private interest to promote the public good. Smith’s conception remains relevant today, notwithstanding the enormous increase in economic complexity since the Industrial Revolution. Briefly explain the idea of the invisible hand. What is so important about the idea of the invisible hand? Source: Ben S. Bernanke, “Financial Regulation and the Invisible Hand,” speech made at the New York University Law School, New York, New York, April 11, 2007. 3.12 Evaluate the following argument: “Adam Smith’s analysis is based on a fundamental flaw: He assumes that people are motivated by self-interest. But this isn’t true. I’m not selfish, and most people I know aren’t selfish.” 3.13 Writing in the New York Times, Michael Lewis argued that “a market economy is premised on a system of incentives 11/4/13 12:29 PM Chapter Summary and Problems designed to encourage an ignoble human trait: self-interest.” Do you agree that self-interest is an “ignoble human trait”? What incentives does a market system provide to encourage self-interest? Source: Michael Lewis, “In Defense of the Boom,” New York Times, October 27, 2002. 3.14 Some economists have been puzzled that although entrepreneurs take on the risk of losing money by starting new businesses, on average their incomes are lower than those of people with similar characteristics who go to work at large firms. Economist William Baumol believes part of the explanation for this puzzle may be that entrepreneurs are like people who buy lottery tickets. On average, people who don’t buy lottery tickets are left with more money than people who buy tickets because lotteries take in more money than they give out. Baumol argues that “the masses of purchasers who grab up the [lottery] tickets are not i ­ rrational if they receive an adequate payment in another currency: psychic rewards.” a. What are “psychic rewards”? ب. What psychic rewards might an entrepreneur receive? ج. Do you agree with Baumol that an entrepreneur is like someone buying a lottery ticket? Briefly explain. Source: William J. Baumol, The Microtheory of Innovative Entrepreneurship, Princeton, NJ: Princeton University Press, 2018. 3.15 The 2009 International Property Rights Index study states: [T]hose developing countries that respect property rights grow on average faster than those that fail to provide sound legal and political environments and protection for physical property rights. M02_HUBB5441_05_SE_C02.indd 67 67 Why would the protection of property rights be likely to increase economic growth in a developing, or low-income, country? Source: Gaurav Tiwari, “Report: Property Rights Linked to Economic Security,” International Property Rights Index 2018 Report. 3.16 According to an article on Phillyburbs, some farmers in rural Pennsylvania are causing a “stink” by using pig ­ anure for fertilizer. The farmers purchase the pig m manure, which is an organic fertilizer, from a nearby pork processing plant and spread it across the fields where they grow corn and soybeans. The article asserts that the farmers switched to pig manure because of the skyrocketing price of chemical fertilizers. Some of the residents of Milford, however, have complained about the smell, ­ but the “farmers are likely protected under ­ ennsylvania’s P Right to Farm Act, which allows farmers to engage in practices that are common to agriculture.” a. What price signal did the farmers respond to in their switch to the organic pig manure fertilizer? ب. According to the Pennsylvania Right to Farm Act, do the farmers or the townspeople have the property right to the smell of the air around the farms? (Some of the residents did ask the township to urge the farmers to plow under the manure to reduce its stench.) Source: Amanda Cregan, “Milford Farmers Switch to Pig Manure Causing a Stink for Neighbors,” Phillyburbs, March 6, 2018. 3.17 [Related to the Making the Connection on page 57] The British historian Thomas Macaulay once remarked that copyrights are “a tax on readers.” In what sense are copyrights a tax on readers? If copyrights are a tax on readers, why do governments enact them? 11/4/13 1:19 PM .

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