Solution Manual for Essential Foundations of Economics, 8th Edition

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Table ofContentsPrefaceYour Complete Learning Packagev◼Part 1 IntroductionChapter 1Getting Started1Appendix: Making and Using Graphs11Chapter 2The U.S. and Global Economies17Chapter 3The Economic Problem29Chapter4Demand and Supply39◼Part 2 A Closer Look at MarketsChapter 5Elasticities of Demand and Supply49Chapter 6Efficiency and Fairness of Markets59Chapter 7Government Actions inMarkets71Chapter8Global Markets in Action85Chapter9Externalities: Pollution, Education, and Health Care97◼Part3Prices, Profits, and Industry PerformanceChapter 10Production and Cost107Chapter 11Perfect Competition117Chapter 12Monopoly131Chapter 13Monopolistic Competition and Oligopoly143◼Part4Monitoring the MacroeconomyChapter14GDP: A Measure of Total Production and Income155Appendix: Measuring Real GDP165Chapter 15Jobs and Unemployment169Chapter16The CPI and the Cost of Living179◼Part5Understanding theMacroeconomyChapter17Potential GDPand Economic Growth189Chapter18Money andInflation201Chapter19Aggregate Supply and Aggregate Demand213Chapter20FiscalPolicyand Monetary Policy223

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Your CompleteLearning PackageWELCOME!◼Using Your Teaching ResourcesYour teachingresources are the most comprehensive, carefully developed, and accurate ever madeavailable. They consist of:•Instructor’s Manual•Solutions Manual•TestItem Files•PowerPoint Resources•MyEconLabThe firstfourof these resources are delivered on theEssentialFoundationsofEconomicsInstructor’s Re-sourcedisk.Allthe components of the instructor’s resourceskey off theCheckpoints in the textbook, which givesthe entire package a tight integrity.Wehave played a leading role inauthoringthequestions inMyEconLabandthePowerPointresources;paid close attention to the design, structure, and organiza-tion ofMyEconLab;helped create and check the Solutions Manual;and helped in reviewing and revis-ing the Instructor’s Manual and TestItem Files. Our hands-on approach hasensuredthat every ele-ment of the package achieves the consistency that teachersand their studentsneed.Mark Rush walks you through the Instructor’s Manualand Solutions Manualon pp. ix–x, so we willfocus on the other components.◼TestItem FilesOurTestItemFiles, with more than7,000 questions, providea huge variety of question types. We havemultiple-choicequestions, numericalquestions, short-answerquestions,questions based onchapterfigures,and essay questions.Thereare integrative questions, which are questions drawn from two ormore checkpoints or chapters and therefore require the students to integrate the material in theirminds. We also included all the questions from the Study Guide, so you may “reward” students whoare diligently using the Study Guide. The Study Guide questions are, of course, noted as such. Thequestions are intheorder that the material is encountered in each checkpoint. The questions are identi-fied as to their skill level and alsoidentifiedaccording tothe AACSB classification, that is, “reflectivethinking,” “analytical thinking,” and so on. Within each topic, the questions are also ordered with thenumeric and graphing questions following the more qualitative questions.For this edition, David Black (University of Toledo), Carol Dole (Jacksonville University), and SvitlanaMaksymenko (University of Pittsburgh) worked to improve the Test Item Files. Mark Rush also wrote

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viPREFACE 1some new questions. We have deleted questions about topics no longer covered. And, more important-ly, we have pruned questions that we thought were weaker than average. So what you have now is thebest of the best. These questions should help you create exams that really determine how well yourstudents have “put it all together.” Along with our Checkpoint approach to the other Test Item Filequestions, you have one of the most comprehensive testing systems on the market.The core of the questions comes from seven dedicated principles instructors to form one of the mostcomprehensive testing systems on the market. Our original questions authors are: Ali Ataiifar (Dela-ware County Community College), Diego Mendez-Carbajo (Illinois Wesleyan University), Carol Dole(Jacksonville University), Gregory E. Givens (University of Alabama), Homer Guevara, Jr. (NorthwestVista College), Lee Hoke (University ofTampa), William Mosher(Assumption College), BuffieSchmidt (Augusta State University), Terry Sutton (Southeast Missouri State University), Cindy Tori(Valdosta State University), and Nora Underwood (University of California, Davis). The same ques-tions authors also wrote questions for the Study Guide and Web site to ensure consistency across theentire package. Many of the questions were reviewed by either John Graham (Rutgers, The State Uni-versity of New Jersey, Campus at Newark) or Constantin Ogloblin (Georgia Southern University) tocheck the answers and improve the questions.◼TestGenAll TestItem Filesare available in Test Generatorsoftware (TestGen with QuizMaster). TestGen’sgraphical interface enables instructors to view, edit, and add questions; transfer questions to tests; andprint different forms of tests. Tests canbe formatted by varying fonts and styles, margins, and headersand footers, as in any word-processing document. Search and sort features let the instructor quicklylocate questions and arrange them in a preferred order. QuizMaster, working with your school’s com-puter network, automatically grades the exams, stores the results onadisk, and allows the instructorto view and print a variety of reports.◼PowerPoint ResourcesWe have created the PowerPoint resources based on our 24 years of experience using this tool in ourown classrooms. These resources are:•Lecture notes with full-color, animated figures and speaking tipsThe speaking notes sections ofthe lecture notes provide material from the Instructor’s Manual onteaching tips and suggestions.•Stand-alone textbook figures and tables, animated with step-by-step walk-throughsThe stand-alone textbook figures and tables enable you to incorporate these items in your ownpersonal PowerPoint lecture notes.•Eye On featuresThe Eye On features presentations give you an opportunity to enliven your lectures with data andapplications to issues in the U.S. and global economies and to add a historical dimension.•Alternative micro lecture notes with full-color, animated figures and tables that use examples dif-ferent from those in the textbook.We have set up the figures so that you can expand them to full-screen size or shrink them to dis-play text explanations alongside them at a single mouse click during a lecture.We have determined the optimal build sequence for the animated figures and have produced themwith the same degree of clarity and precision as the figures in the text.

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YOUR COMPLETE LEARNING PACKAGEvii◼MyEconLabMyEconLabputsyourstudents in control of their learningand givesyoua powerfultool for monitor-ingtheirprogress andsetting automatically gradedhomework,tests,andquizzes.MyEconLab caneven grade assignments that require students to draw a graph.•The core of MyEconLabisa large bank of exercises consisting of four question types—multiplechoice, free response numerical, fill blank, and draw graph.•All the exercises are automatically gradedand the grades are captured in a grade book.•Many of the exercises are generated by algorithms and play a large number of variations.•All the exercises are accessible in the instructor’s Homework and Test Manager.•Some of the exercises are available to your students with no further input required by you in Sam-ple Tests and Quizzes (although you can disable student access to this material if you wish).•Other exercises are available to students only if assigned by the instructor in a Homework, Test orQuiz.•Students work apersonalizedStudy Planthat is generated from theirperformance onthe SampleTestsand Quizzesand onHomework, Tests, and Quizzes that youassign.•When students work exercises inStudy PlanorHomeworkassignments they receive instant andextensive feedback that is specific to the answer given (whether incorrect or correct) and have ac-cess toan array of other study resources that include:1.Guided solution–astep-by-stepwalk through the question with a series of smaller questionsthat build up to the complete question2.Textbook content–quick reference to specific pages of the text that correspond to each StudyPlan exercise.3.Animated figure—therelevant figurein the textbookwith astep-by-step animationandaudioexplanations of the action.•When students work exercises in a Test or Quiz, they get no help or feedback at the time of work-ing the exercisesbutyou can set a review option after the Test or Quiz closes.•AllthetextbookPractice Problemsin each Checkpoint andall ofthe end-of-chapter Study PlanProblems and Applicationsare available in Study Plan.•All the Instructor Assignable Problems and Applications in the textbook are available intheHomework and Test Managerand are reserved for instructors. Students have no access to thesequestions unless they are instructor-assigned.•The correlation between the text and MyEconLab is perfect and seamless.•The 12,000-question Test Item File is available in MyEconLab for online tests and quizzes.•Economics in the News,which is updated daily through the school year on MyEconLab, is also up-dateddailyas instructor-assignable automatically graded problems in theHomework andTestManager.Refer to the Instructor Quick Start Guide or contact yourPearsonsales representative to set upMyEconLab for your course.◼Checklist and Checkpoints: The Glue that Holds Your Tools TogetherEach chapter of the textbook opens with a Chapter Checklist that tells your students what they’ll beable to do when they’ve completed the chapter. The number of tasks varies from two tofive and mostoften is three or four. Each part of a chapter, in the textbook, Study Guide, andMyEconLabis linkeddirectly to a Checklist item to enable your students to know exactly what they’re studying and how itwill enable them to accomplish their learning objective. Each part of a chapter in the textbook endswith a Checkpoint—a page that offers a Practice Problem to test understanding of the key ideas of thepart, a worked and illustrated solution to the Practice Problem, and a further (parallel) Exercise.

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viiiPREFACE 1Our Checkpoints enable students to review material when it’s fresh in their minds. We suggest thatyou encourage your students to work the Checkpoints and if possible, devote some class time to work-ing sample problems with them. The TestItem Filesare organized by Checkpoints so that you canmatch your tests and exam papers closely to the parts of each chapter that you’ve emphasized most.◼Instructor’s ResourceDiskThisdiskcontainstheInstructor’s Manualand Solutions Manualin Microsoft Word andPDF formats.It also contains the ComputerizedTestItem Files(with a TestGen program installer) and PowerPointresources.It is compatible with both Windows and Macintosh operating systems.◼Instructors TellUs What Works forYouPlease tell us the tools that you find most helpful. And tell us what you think we can improve. You canemailusatrobin@econ100.comormichael.parkin@uwo.ca,oruse“ConsulttheAuthors”onMyEconLab.Robin BadeMichael ParkinOntario, CanadaFebruary, 2017

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YOUR COMPLETE LEARNING PACKAGEixYOUR INSTRUCTOR’S MANUALAND SOLUTIONS MANUALRobin and Michael just presented an overview of the tools available to help you with your course.Per-sonally,I think that the existence of these tools is incredibly good timing because at no time in historyhas teaching your students the principles of economics been either more challenging or more im-portant. Similar to all the resources available to qualified adopters ofEssentialFoundationsofEconomics,theInstructor’s Manualand the Solutions Manual aredesigned to assist you in your teaching, so Iwant to spend some time discussingthemin more detail.Let me start with the Instructor’s Manual.◼Instructor’s ManualThe Instructor’s Manual isyour one-stop package of material you need for your lectures.I have de-scribed what is contained in your Instructor’s Manual and given some suggested uses below.Chapter OutlineLeading off is a brief outline of the chapter. This section is designed to help you as you rush off to classand need one last glance to discover whether a certain topic is covered in the chapter. The outline isbrief, highlighting the major headings in the book. The extended lecture outline, presented later in thisInstructor’s Manual, is a more complete outline.Chapter RoadmapThe Chapter Roadmap has four concise sections that let you see how the current chapter fits into theflow of the material. One section covers “What’s New in this Edition;” another “Where We Are;” an-other, “Where We’ve Been;” and the fourth, “Where We’re Going.” This section is designed as a lecturehelper, so if you need to determine how the chapter fits into the scheme of things, turn here.Class Time NeededThis short section can be extremely valuable, particularly if during the term you run out of time beforeyou run out of material! The Class Time Needed section presents a careful estimate of how many 50-minute lectures are usually needed to cover a particular chapter. These times are just estimates, butthey are the results of consideration by several experienced instructors. There isnothingwrong withusing more time or less time, depending on your interests and the class’s participation.Chapter LectureThis sectioncontainscompletelecture notes that you canimmediatelyuse in your lecture orsimplyreferenceto help prepare yourownlecture notes. This material might well be the most valuable sec-tion in the Instructor’s Manual when you are pressed for time and need to gather notes for your lec-ture! Incorporated in these notes are suggested figures that you can draw, tables with numerical ex-amples that you can use, and, in shaded boxes, suggestedpointsto emphasize or interesting topics thatyou can mention to bring your lecture to life. To help you recall what is new to the students, terms inbold face indicate glossary terms from the textbook, which are newly introduced to the students in thechapter.We have incorporated some additional features in these lectures:Lecture LaunchersWe know how fascinating and relevant economics is. But nowadays, with so manyother events competing for our students’ attention, it is much too easy to lose out to the latest craze.This section helps overcome this problem by presenting class-tested methods devised by award-winning teachers that will stimulate your students’ interests.These suggestions are highlighted andare scattered throughout the lectures.As you glance throughthem,you will see a variety of sugges-tions that cover awide range of teaching styles. Select those that work best for your style. No matterwhether or not you used the material in this section before—youdefinitelywant to take a look at it this

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xPREFACE 1time! And if you have suggestions for other lecture launchers, please drop me a note at the e-mail ad-dress at the end of this preface—I am collecting additional suggestions for the next edition.LandMinesAs instructors, we know that certain topics are difficult for students. Determining the bestway to present difficult material can be a hard and tricky task. These suggestions aredesigned to easethis problem by using the insights of talented and experienced instructors. Thelandmines identifyare-as that students have found difficult to grasp and then present suggestions about how to overcomethese problems. In my career, I have taught over60,000 students but I have found these suggestionstobe incredibly valuable and, even as I worked on this Instructors’ Manual, I adopted theminto my class.So check out the suggestions and, once again, if you have further tips please e-mail me.“Eye On”A wonderful feature of the textbook is the material presented in each chapter called “EyeOn.” “Eye onthe U.S. Economy” describes the U.S. economy today or in the recent past. “Eye on the Global Econo-my” and “Eye on the Past” help the student to place current and recent U.S. experience in a global andhistorical perspective.And the “Eye on Your Life” helps the student relate what he or she is learning totheir own life.This material is fascinating and lends itself to further discussion or assignmentssothelast section in the Instructor’s Manual presents suggestions about how you can use these “EyesOn” foreither class discussion or assignments. In either case, check out our suggestions because they can deep-ly enrich your course!Additional Exercises for AssignmentThe last section of the Instructors Manual presents some additional discussion questions. (In previouseditions these questions had been located in the Solutions Manual.) Some of these questions are suita-ble for essay exams; some are more open-ended and are probably best used for classroom discussion;and some are similar to the Checkpoint Exercises. All of them are designed to make your studentsthink and use the material you have been teaching them. The Instructors Manual also has suggestedanswers for these questions which you can use yourself or pass out to your students.◼SolutionsManualTheSolutionsManualhas complete answers to all the Chapter Checkpoint questions.For ease of use,the Solutions Manual reprints the questions from the textbook before the answers so you will not needto carry both the textbook and theSolutions Manual to class in order to assign or answer the questions.Answers to Chapter CheckpointProblems and ApplicationsOne of the remarkable pedagogical tools of the textbook is theChapter Checkpoint problems and ap-plicationsat the end of each chapter. Each chapter has three pages of questions; “Study Plan Problemsand Applications”on the first page can be worked bystudents in their MyEconLabStudy Plan. “In-structor Assignable Problems and Applications”on the other two pages are in the MyEconLabHome-workand Test Manager.If youprefer toassign theseproblems and applications as paper tests,you will appreciate the completeanswersin the Solutions Manual. You can use these answers to help you in grading assigned questionsor you can copy the answers and distribute them to your students.

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YOUR COMPLETE LEARNING PACKAGExiACKNOWLEDGMENTSIn a very real sense, teaching the principles ofeconomics isa“work in progress.” As newinsights are uncovered, as new knowledge isdeveloped, the principles of economics is al-ways changing and evolving. You can be as-sured that Bade/Parkin’sEssentialFoundationsofEconomicswill likewise always change andevolve to remain the best book available foryouand your students’ use. So it is with agreat deal of pleasure that we acknowledgepeople who have helped create theInstruc-tor’s ManualandSolutions Manual.RichardGosselinofHoustonCommunityCollege and Carol Dole ofJacksonvilleUni-versity are the authors of the first edition ofthe Instructor’s Manual, which was ultimate-ly divided into theSolutions Manual and theInstructor’s Manual.Fora pastedition,Mar-garet AnneShannon ofGordon CollegeandRichard Gosselinhelped revise the Instruc-tor’s Manual.For thisedition,Luke Arm-strong of Lee Collegeessentially wrote andimprovedthe Instructor’s Manual so that itreflects the changes made in the textbook.Iupdated the Solutions Manual, but in truththe main parts of it still belong to the originalauthors, Richard Gosselin and Carol Dole.Forthepasteditions,Pearsonassembledthree very talented instructors who checkedthe accuracy of the entire set of supplements.Althoughnot alllookedexplicitly at thesebooks, often comments made on the StudyGuide or TestItem Fileshelped improve theInstructor’s Manual or Solutions Manual. So Iwant to thank all of themfor their help:•Harry Ellis, University of North Texas•John Graham, Rutgers The State Universi-ty of New Jersey•Kate Krause, University of New MexicoThe number of errors they found and the im-provements they created are beyond count. Isoon learned that without theirinput, thesebookswould beverymuch inferior products.And, working with each was a sheer pleas-ure!Jeannie Shearer-Gillmore, University of West-ern Ontario, checked every word, every sen-tence, every paragraph, and every page of thebooks. She made a huge number of correc-tions and comments and found an embarrass-ingly large number of errors in theanswers tothe questions in the Solutions Manualfor thisedition. Jeannie’s value-added is almost be-yond calculation.And she accomplished allthis work while basking in the Canadian win-ter.Even with all this help, it is undoubtedly thecase that there remains substantial room forimprovement inboth theInstructor’s Manualand Solutions Manual. Indeed, any correc-tions,suggestions,orcommentsthatyoumighthavewouldbegreatlyappreciated.Moreover,itis extremelyeasyforyou tobring these to my attention. You can eitherwrite me, at the address below, or e-mail meat MarkRush@ufl.edu. Either way, I wouldgreatly appreciate hearing from you. In a bet-ter world, there would be some compensationofferedforsuggestions,corrections,andcomments you might make. Unfortunately,this is not that better world! But I can promisethat I’ll acknowledge your help in future edi-tions.Mark RushEconomics DepartmentUniversity of FloridaGainesville, Florida 32611February, 2017

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GettingStartedChapter1ANSWERS TOCHAPTERCHECKPOINTS◼Study Plan Problems and Applications1.Provide three examples of scarcity that illustrate why even the 1,826billionaires in the world face scarcity.The 1,826billionaires might wantto be able to eat unlimited meals with-out gaining weight; live to be at least 140 years old and enjoy perfecthealth everyday; be able to wake up in San Francisco and go to sleep inParis after spending no more than 3 hours on a plane. None of thesewants can be fulfilled given the present state of technology and resourcesavailable.2.Label each entry inthe list as dealing with a microeconomic topic or amacroeconomic topic.Explain your answer.•Motor vehiclesproduction in China is growing by 10 percent a year.This entry is a microeconomic topic becauseindividuals and businessesmake decisions whether to buy or sell cars.•Coffee prices rocket.This entry is a microeconomic topic becauseindividuals and businessesmake decisions whether to buy or sellcoffee.•Globalization has reduced African poverty.This entry is a macroeconomic topic becauseglobalization is the resultof choices made by billions of peoplerather than an individual or busi-ness.•The government must cut itsbudgetdeficit.This entry is a macroeconomic topic becauseneither an individual nor abusiness makes decision to cut expenditures.•Apple sells20million iPhone6smartphonesa month.This entry is a microeconomic topic becauseindividualsand Applemake decisionwhethertobuy or sell iPhones.

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2Part 1.INTRODUCTIONUse the following information to work Problems 3 to 6.Jurassic Worldhad world-wide box office receiptsof $1.66 billion. Themovie’sproduction budgetwas$150 millionwithadditional marketing costs.Asuccessful movie brings pleasure to millions,createswork for thousands,and makes a fewpeoplerich.3.What contribution does a movie likeJurassic Worldmake to coping withscarcity? When you buy amovieticket, are you buying a good or a ser-vice?Scarcity still exists but the amount of entertainment available in the econ-omy increases. Buying a ticket to watch a movie is buying a service.4.Who decides whether a movie is going to be a blockbuster? How do youthink the creation of a blockbuster movie influenceswhat,how, andforwhomgoods and services are produced?The audience decides whether a movie will be a blockbuster because theaudience decides whether to attend the movie.The “what” question is affected in three ways: First, one good or servicethat is produced is the blockbuster movie. Second, the people whose in-comes are higher as a result of the blockbuster then buy an assortment ofgoods and services and so this assortment of goods and services is pro-duced. Finally, the “what” question is influenced if the movie leads tospinoff goods (such as toys) or creates a series of sequels or similar films.The “how” question is affected to the extent that movies use differentproduction methods. Some movies, for instance, have a lot of special ef-fects while other movies have few or none. The “for whom” question isinfluenced because those people who receive the profits of a blockbustermovie have higher incomes and so more goods and services are producedfor them.5.What are some of the components of marginal cost and marginal benefitthat the producer of a movie faces?Some of the marginal costs the producer faces are the cost of an actor oractress, the costs of the crew for a day, the costs of a location, and thecosts of advertising in a newspaper. The marginal benefits the producerenjoys are his or her salary and/or profit participation from the movie,royalties from the movie, the prestige resulting from a successful movie,and any awards given to the producer of the movie.6.Suppose thatChris Pratthad been offered a part in another movie andthat to hire him forJurassic World, the producer had to doubleChrisPratt’spay.Whatincentiveswouldhavechanged?Howmightthechanged incentives have changed the choices that people made?The higher pay would have increased Mr.Pratt’sincentive to makeJuras-sic Worldrather than the other movie and perhaps affected his choice to

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Chapter 1.Getting Started3makeJurassic Worldrather than the other movie. The higher pay wouldhave increased the incentive of the producer to decrease the expense ofother aspects of the movie so the producer might have chosen to reducethe pay of the other stars in the movie.7.What is the social interest? Distinguish it from self-interest. In youranswer give an example of self-interest and an example of social interest.The social interest looks at what is best for society as a whole; choices thatare best for society as a whole are said to be in the social interest. The self-interest looks at what is best for the individual; choices that are best forthe individual making the choice are said to be in the self-interest. An ex-ample of a choice made in the self-interest is a student’s decision to takean economics class. An example of a choice made in the social interest is afirm’s decision to reduce its air pollution.8.Pam, Pru, and Pat are deciding how they will celebrate the New Year.Pam prefers to take a cruise, is happy to go to Hawaii, but does not wantto go skiing. Pru prefers to go skiing, is happy to go to Hawaii, but doesnot want to take a cruise. Pat prefers to go to Hawaii or to take a cruisebut does not want to go skiing. Their decision is to go to Hawaii. Is thisdecision rational? What is the opportunity cost of the trip to Hawaii foreach of them? What is the benefit that each gets?Pam, Pru and Pat’s decision to go to Hawaii is rational. All three of themconsidered the cost and benefit of various New Year’s plans. All threewere at least willing to go to Hawaii while Pam and Pat were unwilling togo skiing and Pru was unwilling to go on a cruise. The opportunity costof the trip for Pam is a cruise; for Pru, it is skiing; and for Pat, it is a cruise.The benefiteach receives is the pleasure, the relaxation,excitement,and/or knowledge gained from the trip.9.Label each of the entries in the list as a positive or a normative statement.•Low-income people pay too much for housing.The entry that low-income people pay too much for housing is a norma-tive statement.•The number of U.S. farms has decreased over the past 50 years.The entry about the number of farms is a positive statement.•Toyota expands parts production in the United States.The entry aboutToyota expanding parts productionis apositivestate-ment.•Imports from China are swamping U.S. department stores.The entry about imports is a normative statement.•Theruralpopulationin theUnited States is declining.The entry about the population in rural areas is a positive statement.

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4Part 1.INTRODUCTIONUse the following information to work Problems 10 to 12.REI is paying its employees to take Black Friday, Thanksgiving offREI, the outdoor gear and apparel retailer, is paying employees to celebrateThanksgiving 2015 by spending Black Friday outdoors with their families.Source:Sustainable Brands, October 28, 201510.With Black Friday off with full pay, explain what is free and what isscarce.The workers’ time remains scarce because Black Friday remains only oneday. REI’s gear and apparel remain scarce because there is a still a limitedamount of these products. The publicity that REI received is not free be-cause the company paid for it with less production and, accordingly, lessrevenue and profit.11.What is REI’s incentive to give its workers Black Friday off? Was REI’sdecision made in self-interest or in the social interest? Explain your an-swer.REI’s managershave the incentive to give their employees the day off ifthey believe that the positive publicity that resulted could lead to in-creased future sales. The managers might also believe that the employeeswould feel grateful and would worker harder in the future. Of course, themanagers also had the incentive to give their workers the day off becausemany other employers do so.REI’s decision to give its workers a paid day off had elements of both self-interest and social interest. To the extent that his decision was motivatedby the free publicity anda resultingrise in sales,or the expectation that itsemployees would work more diligently in the future,the decision wasmotivated by self-interest.However,to the extent that a desire to allowthe workers a chance to spend time with their families, the decision alsohad elements of social interest.12.Do you think that REI workers will shop or spend the day with family?Explain your answer.Some REI workers will shop and others will spend the day with theirfamily, depending on which alternative is in their self-interest.13.ReadEye on the Benefit and Cost ofSchoolon p. 12and explainwhy bothyou andClayton Kershawmade the right decision.Clayton Kershawmade the correct decision to skip college because theopportunity cost to him of attending college (which includes his forgonesalary playing baseball) vastly exceeded the benefits to him of attendingcollege. For most students, the opportunity cost of attending college is notso large, so for most students the benefitsfromattending college exceedthe opportunity cost of attendance. For these students, attending college isthe correct decision.

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Chapter 1.Getting Started5◼Instructor Assignable Problems and Applications1.Which of the following are components of the opportunity cost of being afull-time studentwho lives at home? Thethings that the student wouldhave bought with:•A higher incomeThe items the student would have purchased with the higher income heor she would have earned if he or she was not a full-time student are anopportunity cost of being a full-time student.•Expenditure on tuitionThe cost of tuitionispart of the opportunity cost of being a full-timestudent because thisexpenseis paidonlybecause the person is a stu-dent.•A subscription to theRolling StonemagazineIf the subscription was required by a class and the individual sub-scribedonlybecause of the class requirement, then the cost of the sub-scription is an opportunity cost of being a student. However if the per-son would have subscribed toRolling Stoneeven if he or she was not astudent, then the cost of the subscription is not an opportunity cost ofbeing a student.•The income a student will earn after graduatingThe income earned after graduation is not an opportunity cost of beinga student.2.Think about the following news items and label each as involving awhat,how, orfor whomquestion:•Today, most stores use computers to keep their inventory records,whereas 20 years ago most stores used paper records.Stores using computers for inventory records today versus paper 20years ago answers thehowquestion.•Healthcare professionals and drug companies recommend thatMedi-caid drug rebates be made available to everyone in need.Deciding whether to offer lower Medicaid drug rebates, which wouldlower the prices for drugs, is aforwhomquestion.•Anincreaseinthe gas taxpays for low-costpublic transit.Building a low-costpublic transit system answers awhatquestion. Be-cause not everyone will use the public transportation equally nor willeveryone pay the same amount of taxes, there also is aforwhomaspectof the headline.3.The headlines inthe listappeared inThe Wall StreetJournal. Classify eachheadline as a signal that the news article is aboutamicroeconomic topic or

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6Part 1.INTRODUCTIONa macroeconomic topic. Explain your answers.•Job Gains Calm Slump WorriesThis entry is a macroeconomic topic because the slump concerns aturndown in the overall economy and neither an individual nor a busi-ness makes the decision to slow the aggregate economy.•Washington Post’s Profit FallsThis entry is a microeconomic topic becauseit concerns the profit out-come of one business, the Washington Post.•Overcapacity, Fuel Costs Hit ShippingThis entry isa microeconomic topic. Itdescribes the situationwithinone sector—shipping—which is being affected byovercapacityand arise in theprice offuel.•U.S. Budget Deficit ExpandsThis entry is a macroeconomic topic because thebudget deficit is the re-sult of taxes and government spending spread overall sectors in the en-tireeconomy.4.Your school decides to increase the intake of new students next year. Tomakeits decision, what economic concepts would it have considered?Would theschool have used the “economic way of thinking” in reachingits decision?Would the school have made its decision on the margin?The school would consider the extra revenue that each additional studentwould bring and compare that to the extra cost of providing each studentwith instruction and service. By comparing the extra revenue and the ex-tra cost, the school is making its decision on the margin and is using theeconomic way of thinking. If the school compares the additional revenueto the additional cost, it makes its decision on the margin.5.Provide examples of(a) amonetaryincentiveand(b) anon-monetaryincentive, a carrot and a stick of each, that government policies use to in-fluencebehavior.(a)A monetary carrot that the students might answer because it is closeto their lives is student aid, such as Pell grants. A monetary stickmight be taxes on liquor.(b)A non-monetary carrot is government support foryouth sports, suchasallowing little league teams to use a county park,and a non-monetary stick is jail terms for illegal drug or alcohol use.6.Think about each of the items inthe list and explain how they affectincentivesand might change the choices that people make:•A hurricane hits Central Florida.The hurricane affects the people in Central Florida and the consumerswho purchase the products produced in Central Florida, such as orang-

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Chapter 1.Getting Started7es or vacation services. Residents’ incentives change if they suffereddamage from the hurricane because they have the incentive to repairthe damage. If the price of home repair rises, residents who specialize inhome repair have an incentive to work longer hours to earn the higherprice. If the hurricane raises the price of the goods and services pro-duced in Central Florida, consumers have the incentive to buy less ofthese particular goods and services because they are more expensive.•The World Series begins tonight but a storm warning is in effect forthe area around the stadium.The report of the possible storm decreases fans’ incentive to attend thegame. Some fans decide to stay at home and watch the game on television.•The price of a personal computer falls to $50.The fall in the price of a computer increases consumers’ incentive to buya computer. More consumers decide to buy a computer. The fall in theprice of a computer decreases producers’ incentives to produce com-puters. Fewer producers decide to produce computers.•Unrest in the Middle East sends the price of gas to $5 a gallon.The rise in the price of gasoline affects drivers’ incentives to buy gaso-line and large gas-guzzling cars. Drivers decide to buy less gasoline andfewer large gas-guzzling cars. They also might decide to ride publictransportation more often.7.Does the decision to make a blockbuster movie mean that some othermoredesirable activities get fewer resources than they deserve? Is youranswer positive or normative? Explain your answer.Making a blockbuster movie means that some other activities get fewerresources. But whether “more desirable” activities get fewer resourcesthan they “deserve” is a normative answer for two reasons. First the ques-tion of whether an activity is more desirable or less desirable depends onthe person’s judgment and values. Second the determination of whetheran activity gets fewer resources than it deserves also involves the norma-tive decision about the quantity of resources an activity deserves. So theanswer to the question of whether making a blockbuster movie meansthat other more desirable activities get fewer resources than they deserveis a normative answer that depends on the student’s values.8.Provide two examples of economics being used as a tool by(a)a student,(b)a business, and(c)a government. Classify your examples as dealingwithmicroeconomic topics and macroeconomic topics.(a)Students might answer that they use economics as a tool when theybudget their student aid and when they decided which college to at-tend based on the costs of their options. Both instances deal with mi-croeconomics.

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8Part 1.INTRODUCTION(b)A business uses economics as a tool when it decides the price itcharges for its product and the salaries it pays its managers. Both in-stances are microeconomic examples.(c)The government use economics as a tool when it decides whether toincrease taxes on cigarettes or lower the interest rate. The first exam-ple is microeconomic in nature and the second involves macroeco-nomics.Use the following news clip to work Problems9 to 12.Obama unveils major climate change policyObama’s Clean Power Plan, which will set federal limits on carbon emissionsfrom coal-fired power plants, will cost $8.4 billion and reap benefits of morethan $34 billion. Opponents of the plan say it will drive up the cost of elec-tricity for millions of Americans.Source: CNN, August 3, 20159.What are the more than $34 billion of benefits from using less coal toproduceelectricity? Who receives these benefits: the users of electricity ortheowners of power plants, or both the users and the owners?Benefits include: (1) a reduction in carbon emissions, which brings a de-crease in the contribution of human activity to global warming and cli-mate change, and (2) cleaner air, which contributes to improved health.Both the users of electricity and the owners of power plants receive thebenefits.10.What are the $8.4 billion of costs arising from using less coal to produceelectricity?Who bears these costs: the users of electricity or the owners ofpowerplants, or both the users and the owners?To decrease carbon emissions from coal-fired plants requires that theplants install more pollution abatement equipment, such as scrubbersontheir stacksthat decrease emissions of carbon. The costs of the equipmentand its installationaccount for the costs of the Clean Power Plan. Users ofelectricity, who pay higher prices for electricity, will pay some of thesecosts and owners of power plants, who receive lower profits from produc-ing electricity, also will pay some of the costs.11.Explain why someone might oppose the Clean Power Plan when itsbenefitsexceed its costs.Someone might oppose the Clean Power Plan because he or she believesthat the benefits and costs are measured incorrectly so that in reality thecosts exceed the benefits. Others might oppose it because the costs thatfall on them exceed the benefits that they receive.12.Explain whether the Clean Power Plan has an opportunity cost.The Clean Power Plan has an opportunity cost because the resources de-voted to meeting its goals and requirements could be used instead to pro-ducing other goods and services.

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Chapter 1.Getting Started9◼Multiple Choice Quiz1.Which of the following describes the reason why scarcity exists?A.Governments make bad economic decisions.B.The gap between the rich and the poor is too wide.C.Wants exceed the resources available to satisfy them.D.There is too much unemployment.Answer: CAnswer C uses the definition of scarcity on page 2.2.Which of the following defines economics?Economics is the social science that studies ___________.A.the best way of eliminating scarcityB.the choices made to cope with scarcity, how incentives influencethosechoices, and how the choices are coordinatedC.how money is created and usedD.the inevitable conflict between self-interest and the social interestAnswer:BAnswerBuses the definition ofeconomicson page 2.3.Of the three big questions,what,how, andfor whom, which of the fol-lowing isan example of ahowquestion?A.Why do doctors and lawyers earn high incomes?B.Why don’t we produce more small cars and fewer gas guzzlers?C.Why do we use machines rather than migrant workers to pick grapes?D.Why do college football coaches earn more than professors?Answer:CAnswerCdescribeshowgrapes are picked.4Whichof the following isnot a key idea intheeconomicway ofthinking?A.People make rational choices by comparing costs and benefits.B.Poor people are discriminated against and should be treated morefairly.C.A rational choice is made at the margin.D.Choices respond to incentives.Answer:BAnswerB isnotpart of description of the economic way ofthinking on page 8.

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10Part 1.INTRODUCTION5.A rational choice is ___________.A.the best thing you must forgo to get somethingB.what you are willing to forgo to get somethingC.made by comparing marginal benefit and marginal costD.the best for societyAnswer:CAnswerC is part of description of a rational choice on pages 8and9.6.Whichofthefollowingbest illustratesyourmarginal benefitfromstudying?A.The knowledge you gain from studying 2 hours a night for a monthB.The best things forgone by studying 2 hours a night for a monthC.What you are willing to give up to study for one additional hourD.What you must give up to be able to study for one additional hourAnswer:CPage10shows that answerC is the marginal benefit fromstudying.7.The scientific method uses models to ___________.A.clarify normative disagreementsB.avoid the need to study real questionsC.replicate all the features of the real worldD.focus on those features of reality assumed relevant for understandingacause and effect relationshipAnswer:DAnswer D uses the definition of an economic model on page15.8.Which of the following is a positive statement?A.We should stop using corn to make ethanol because it is raising thecostof food.B.You will get the most out of college life if you play a sport once aweek.C.Competition amongwireless service providersacross the borders ofCanada,Mexico, and the United States has driven roaming ratesdown.D.Bill Gates ought to spend more helping to eradicate malaria in Africa.Answer:CAnswer C is a positive statement because it can, in theory, betested.

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Appendix:Making andUsing GraphsChapter1ANSWERS TOAPPENDIXCHECKPOINT◼Study Plan ProblemsThe spreadsheet inthe table provides data onthe U.S. economy: Column A is the year; theother columns are quantities sold in millionsper year of compact discs (column B), musicvideos (column C), and singles downloads (col-umn D). Use this spreadsheet to work Problems1 and 2.1.Draw a scatter diagram to show the relationshipbetween the quantities sold of compact discsand music videos. Describe the relationship.Figure A1.1 illustrates the relationship of the datafrom the spreadsheet between the quantities sold ofcompact discs and the quantities sold of music vid-eos. Over all the period, there appears to be aposi-tiveor directrelationship; that is, when more com-pact discs are sold,moremusic videos are sold.ABCD1200476733139220066202358632008385131,0334201022691,16252012211111,3926201414441,200

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12Part 1.INTRODUCTION2.Draw a time-series graph of quantity of compact discs sold. Say in whichyear or years the quantity sold (a) was highest, (b) was lowest, (c) in-creased the most, and (d) decreased the most. If the data show a trend, de-scribe it.Figure A1.2 illustrates the time series of thequantity of compact discs sold using the datafrom the spreadsheet.a.The quantity sold was the highest in 2004.b.The quantity sold was the lowest in 2014.c.The quantity soldneverincreased.d.The quantity sold decreased the most be-tween 2006 and 2008 when it decreased by235 million.Over the entire time period covered in the fig-ure, there is a downward trend in the quantityof compact discs sold.3.The followingdatashows the relationship between two variablesxandy.x012345y32312823167Is the relationship betweenxandypositive or negative? Calculate theslope of the relationship whenxequals 2 andwhenxequals 4. How doesthe slope change as the value ofxincreases?The relationship is negative: Whenxincreases,ydecreases. The slope ofthe relationship equals the change inydivided by the change inxalongthe tangent line; that is, the slope of the relationship at a point equals theslope of the tangent line at that point. Whenxequals 2, the slope of thetangent line equals–4, so the slope of the relationship equals–4. Whenxequals 4, the slope of the tangent line equals–8, so the slope of the rela-tionship equals–8. The slope of the relationship increases in magnitude(the line becomes steeper) asxincreases.

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Appendix 1.Making and Using Graphs134.The table provides data on theprice of a balloon ride, the tem-perature,andthenumberofridesaday.Drawgraphstoshow the relationship between•The price and the number ofrides,whenthe temperatureis 70°F.FigureA1.3illustrates the relationshipbetween theprice andthe numberofrides when the temperature is 70°F.•The number of rides and the tempera-ture,whenthe priceis $15 a ride.Figure A1.4 illustrates the relationshipbetween the number of rides and thetemperature,when the price is $15 aride.Price(dollarsper ride)Balloon rides(number per day)50F70F90F5325040102740321518322720102718

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14Part 1.INTRODUCTION◼Instructor Assignable ProblemsUse the information in the table to workProblems 1 and 2.Column A is the year; theother columns are quantities sold in mil-lions per year of compact discs (column B),musicvideos(columnC),andsinglesdownloads (column D).1.Draw a scatter diagram to show the rela-tionship between quantities sold of musicvideos and singles downloads. Describe therelationship.Figure A1.5 illustrates the relationship of thedata from the spreadsheet between the quanti-ties sold of music videos and singles down-loads. Over all the period, there appears to be anegative or indirect relationship; that is, whenfewer music videos are sold, more singles aredownloaded.ABCD1200476733139220066202358632008385131,0334201022691,16252012211111,3926201414441,200

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Appendix 1.Making and Using Graphs152.Draw a time-series graph of the quantity ofmusic videos sold. Say in which year or yearsthequantitysold(a)washighest,(b)waslowest,(c)decreasedthemost,and(d)decreased the least. If the data show a trend,describe it.Figure A1.6 illustrates the time series of musicvideos sold using the data from the spread-sheet.a.The quantity sold was the highest in 2006.b.The quantity sold was the lowest in 2014.c.The quantity sold decreased the most be-tween 2004 and 2006 and between 2006 and2008, when it decreased by 10 million perperiod.d.Settingaside the periodsduring which thequantity increased, the quantity sold de-creased the least between 2008and 2010.There is a downward trend in the quantity of music videos sold.Use the following data on the relationship between two variablesxandytoworkProblems3and4.x012345y014916253.Is the relationship betweenxandypositive or negative? Explain.The relationship is positive: Whenxincreases,yalso increases.4.Calculate the slope of the relationship whenxequals 2 andxequals 4.Howdoes the slope change as the value ofxincreases?The slope of the relationship equals the change inydivided by the changeinxalong the tangent line; that is, the slope of the relationship at a pointequals the slope of the tangent line at that point. Whenxequals 2, theslope of the tangent line equals 4, so the slope of the relationship equals 4.Whenxequals 4, the slope of the tangent line equals 8, so the slope of therelationship equals 8. The slope of the relationship increases asxincreas-es.

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16Part 1.INTRODUCTION5.Thetable providesdataonthe price of hot chocolate, thetemperature, and thecupsofhot chocolate bought. Drawgraphstoshowtherelationship between•The price and cups of hotchocolatebought,whenthe temperatureis constant.Figure A1.7 illustrates the relationshipbetween the price and the number ofcupsboughtholding constant the tem-perature. Note that there are three rela-tionships, one for each temperature.•The temperature and cups of hot chocolatebought, when the priceisconstant.Figure A1.8 illustrates the relationshipbetween the number of cupsboughtand the temperature, holding constantthe price. Note that there are four rela-tionships, one for each price.Price(dollarspercup)Hot chocolate(cupsperweek)50F70F90F2.004030202.503020103.00201003.501000

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The U.S.and GlobalEconomiesChapter2ANSWERS TOCHAPTERCHECKPOINT◼Study PlanProblemsand Applications1.Which of the following items arenotconsumption goods and services?Explain why not.•A chocolate barA chocolate barisa consumption good.•A ski liftA ski lift is not a consumption good. It is capital that produces a ser-vice for skiers.•A golf ballA golf ballisa consumption good.2.Which of the following items arenotcapital goods? Explain why not.•An auto assembly lineAn auto assembly lineisa capital good.•A shopping mallA shopping mallisa capital good.•A golf ballA golf ball is not a capital good. It is a consumption good.3.Which of the following items arenotfactors of production? Explain why not.•Vans used by a baker to deliver breadVans used to deliver bread are capital, so they are factors of produc-tion.•1,000 shares of Amazon.com stock1,000 shares of Amazon.com stock are not a factor of production. Theshares represent partial ownership of Amazon.com and therefore arefinancial capital.•Undiscovered oil in the Arctic OceanUndiscovered oil is not a factor of production because it is not used to

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18Part 1.INTRODUCTIONproduce goods or services. Once it is discovered, it will become a fac-tor of production.4.Which factor of production earns the highest percentage of totalU.S. in-come? Define that factor of production. What is the income earned bythis factor of productioncalled?Labor earns by far the largest percentage of total U.S. income, 63percentof total income in 2014. Labor consists of the work time and the work ef-fort that people devote to producing goods and services.Theincomeearned by labor is awage.5.With more job training and more scholarships to poor American stu-dents,which special factor of production is likely to grow faster than inthe past?As more people go to school and/or receive job training, the nation’s hu-man capital will grow more rapidly. Human capital is the knowledge andskills people obtain from education, on-the-job training, and work experi-ence. With more job training and more scholarships, human capital willgrow more rapidly.6.Define the factor of production called capital. Give three examples ofcapital,different from those in the chapter. Distinguish between the fac-tor of productioncapital and financial capital.Capital is the tools, instruments, machines, buildings, and other itemsthathave been produced in the past and that businesses now use to producegoods and services.Capital includes railroad engines and cars, servers,and ATMs. The factor of production “capital” is the actual good itself; “fi-nancial capital,” such as stocks and bonds, are the funds that providebusinesses with their financialresourceswhich can be used to acquirecapital goods.7.The pace at which new businesses are created in the U.S. economy andthe percentage of U.S. jobs in young firms has fallen.Ryan Decker and others, “The Role of Entrepreneurshipin U.S. Job Creation and Economic Dynamism.”Journalof Economic Perspectives, 2014.Explain how you would expect these facts to influence what, how, and forwhom goods and services are produced in the United StatesThe answer to thewhatquestion changesif, as is probably the case, newand young business produce different goods and services than more es-tablished business.For example, new and young firms are more likely tocreate apps than older and more established firms.If these groups of pro-ducers produced their goods and services using different technologiesthan the rest of the producers, then the question ofhowgoods and ser-vices would change.For whomgoods and services are produced would

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Chapter 2.The U.S. and Global Economies19changeif some groups of consumers prefer the goods and services pro-duced bythenew and young firms while other groups do not.8.In the circular flow model, explain the real flow and/or the money flowin which each itembelowbelongs. Illustrate your answers on a circularflow diagram.•Youbuy a coffee at Starbucks.InFigure2.1thedarkarrowsrepre-sentmoneyflowsand the grey arrowsrepresentflowsofgoodsandservicesandfactorsofpro-duction. If youbuy acoffeeatStarbucks,yourexpenditureisa money flow fromhouseholdstothegoodsmarket,la-beledain the figure.•ThegovernmentbuyssomeDellcomputers.Thepurchaseofcomputersbythegovernmentrepre-sents a flow of com-putersfromthegoods market to thegovernment, labeledbin the figure.•A student works ata FedEx office.The student working atFedExis a factor of production, so the flow isa flow of the services of factor of production from households to thefactor markets, labeledcin the figure.•Donald Trump rents a Manhattan building to a hotel.Donald Trump’s building in Manhattan is a factor of production, sothe flow is the services from this factor of production from house-holds to the factor markets, labeleddin the figure.•You pay your income tax.Your income tax payment is a money flow from households to thegovernment and is labeledein the figure.

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20Part 1.INTRODUCTION9.Why you can get a free college education in Germany but not in CaliforniaEven American students can get a free college degree in Germany, wherehigh taxes pay for colleges. Despite college being free, fewer students inGermany earn college degrees than in the United States and more entervocational apprenticeships.Source:Los Angeles Times, October 29, 2015IfCalifornia adoptedthe Germanmodel of highereducation, howwould that change for whom goods and services are produced?Thestudents in Californiawho otherwise would not have gone to col-lege but who takeadvantage of the“free”collegeeducation will havehigher incomes than otherwise. Consequently, more goods and ser-vices will be produced for them. The taxpayers who must pay thetaxes necessary to fund these college educations will have less incometo spend on goods and services, so fewer goods and services will beproduced for them.10.ReadEye on the Dreamlineron p. 43and then answer the following ques-tions:•How many firms are involved in the production of the Dreamlinerand how many are identified in the figure on p. 43?Over 400 firms are involved in the production of the Dreamliner. On-ly 15 of them are identified in the figure.•Is the Dreamliner a capital good or a consumption good? Explainwhy?The Dreamliner is a capital good because it will be used to produceservices (airline travel) throughout many future years.•State the factors of production that make the Dreamliner and providean example of each.All the factors of production—land, labor, capital, and entrepreneur-ship—are used to make the Dreamliner. The copper used for wiring isan example of the land used; the engineer who helped design thelanding gear is an example of labor; the huge cranes that lift the vari-ous pieces of the Dreamliner to assemble them is an example of capi-tal; andthe creative and imaginative input of Boeing’s top managerswho organize the resources used to produce the Dreamlinerexempli-fy entrepreneurship.•Explain how the production of the Dreamliner influenceswhat,how,andforwhom, goods and services are produced.Dreamliner influences “what” goods and services are produced bycreating a demand for components manufactured around the world.It influences “how: goods are produced because Boeing and the other400 firms all determine the best way to produce each particular part

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Chapter 2.The U.S. and Global Economies21of the Dreamliner. It influences “for whom” because factors of pro-duction employed to make the Dreamliner receive income from thisproduction, thereby increasing the quantity of goods and servicesthey can purchase.•Use a graph to show where in the circular flow model of the globaleconomy the flows of the components listed on p. 43appear andwhere the sales of Dreamliners appear.Except for thecomponentsbuiltintheUnitedStates,spendingontheothercomponentsappearintheflowofex-penditureonU.S.imports.SalesofDreamlinersappearintheflowofex-penditureonU.S.exports.

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22Part 1.INTRODUCTION◼Instructor Assignable Problems and Applications1.Boeing’s Dreamliner has had a rocky start.•Why doesn’t Boeing manufacture all the components of theDream-liner at its own factory in the United States?Boeing wants to manufacture the Dreamliner at the lowest possiblecost. It would be more expensive for Boeing to manufacture Dream-liners at its own factory in the United States because Boeing does nothave the expertise possessed by its subcontractors and because thewages Boeing paysU.S. workers exceed the wages its subcontractorspaystheir workers.•Describe some of the changes inwhat,how, andforwhom, thatwouldoccurifBoeingmanufacturedallthecomponentsoftheDreamliner at its own factories in the United States.If Boeing manufactured all the components of the Dreamliner at itsown factories in the United States, more components would be pro-duced in the United States and more capital would have been used intheir production.U.S. workers and investors would have received higher incomes butthe Dreamliner would cost more to produce so Boeing would haveearned a lower profit.•State some of the tradeoffs that Boeing faces in making the Dream-liner.Boeing faced a huge number of tradeoffs. For example, when design-ing the plane, Boeing’s engineers had tomake decisions about fueleconomy andpassengerload.Increasing thepassengerloadde-creased fuel economy, so the engineers traded passenger load for fueleconomy. Another example revolves around the construction of theDreamliner. Boeing could have constructed the plane using just a fewcompanies but instead it used over 400. Boeing was trading off thesimplicity of dealing with just a handful of companies for the in-creased specialization by dealing with many specialized companies.•Why might Boeing’s decisions in making the Dreamliner be in thesocialinterest?Building the Dreamliner itself advances the social interest because itincreasesthequantityofcomfortable,rapidtransportation.Theamount of high-quality transportation available in the economy in-creases, which benefits society. The decisions in making the Dream-liner advance the social interest because they were designed to makethe Dreamliner at low cost and thereby avoid wasting resources.2.The global economy has seen a fall in the number of landlines and rapidgrowth in the number of smartphones. In the United States, 41 percent of

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