Several questions about Economics
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1. Is Wal-Mart too big? Or should it be allowed to grow even bigger because of its benefits to us? Why?
2. Explain comparative advantage and why it is good for us.
3. Based on what you've learned in this class, and what you've seen happen, should the government have handled any of the big three auto manufacturers differently? Why?
4. Give a good example, from your own area, of how economic profits may differ from accounting profits.
5. Based on what you've learned and discussed in this class, do you think that the U.S. should nationalize healthcare? Why or why not?
6. What is the difference between technical efficiency and economic efficiency? Give us a good example.
7. What is income elasticity? Give a good example of how income elasticity has affected a recent purchase of yours.
8. In your own words what is the law of diminishing marginal productivity? Give us an example in your own area.
9. Explain how the demand for labor is derived demand. Give us an example in your own area.
10. What are the three most important things you'll take from this class? Why is each important to you?
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Solution Summary
The solution explores several questions about economics and does a superb job of answering them. It touches on issues of "too big to fail", comparative advantage, "big 3 automakers", economic profits, healthcare, technical and economic efficiency, income elasticity, marginal productivity and derived demand. The answers are concise and to the point and can be easily understood by anyone who has a basic knowledge of economics. Overall, an excellent response.
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1. Wal-Mart can be considered too big to fail. This is because a lot of businesses already depend on Wal-Mart. Even Coca-Cola's 50% of the revenues come from Wal-Mart. Wal-Mart supports a number of suppliers and businesses which in turn employ several people. If Wal-Mart fails, then a number of people will lose their job which will severely contract the economy. Thus, Wal-Mart should be prevented and should not get any bigger.
2. The theory of comparative advantage states that a nation should produce goods in which it holds a comparative advantage. In other words, it should only produce goods, which it can produce more efficiently than the other nation. The benefit of comparative advantage is that it ends up generating more for everyone. Assuming free flow of goods and capital, comparative advantage would lead to more goods being produced from same resources, thereby benefiting all.
3. Yes, in my opinion, government should have not interfered with any of the big three automakers. It is true, that if left alone, they may have disappeared. That would have created huge unemployment as a lot of companies depend on the Big 3 automakers for their survival. However, by helping them survive, the government is not making the capital economy work as it is supposed to. The markets would have corrected themselves. Some other automaker might have emerged or some of the other existing ones would ...
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