Contrast the differences between a market system and command economy. Describe each system using the three basic economic questions Essay Assignment

Essay 1 (answer all five questions)
Clearly explain your answers in detail (that means more than one or
two sentences).
1. (12 points) Identify two competing outputs in your life. SELECT A SITUATION THAT
ALLOWS FOR SOME COMPROMISE. No all-or-nothing dilemmas. Clearly, you have lots
of things competing for your resources, but pick just TWO that are very important
and compete with one another for the resources you have available. Choose only two
because you will be translating your situation to a 2-dimensional PPC graph.
FOCUS on OUTCOMES. The limited resources are your constraints and are held
constant, so explain how much of your labor and human capital you have to divide
between these two goals. You cannot use time or money on either axis.
Here is an example: After selecting two activities, pick a time frame. If I have two hours
available, what can I produce? Option #1 is to grade Econ 2200 papers, so the number
of papers graded is the “good” produced. Zero will go at my graph’s origin and the
maximum 2-hour output (say, 10 graded papers) at the x-intercept. Option #2 is to hit
golf balls. I can hit 120 golf balls in 2 hours. Create a spreadsheet should different
combinations (in my case, grading papers and hitting golf balls).
Then I would explain how accomplishing more on one front means scaling back on the
other. The more papers I get graded, the fewer golf balls hit. This output choice need
not be all-or-nothing. I could split my resources 50/50, grading 5 papers and hitting 60
golf balls. That puts me about in the middle, with 5 papers graded 60 golf balls hit. But it
is finals week and grades are due, so this day I give my all to your work, grading the
maximum: 10. I love golf, but teaching is what I do best, and it’s what I get paid for! It
would be nice to get paid for playing golf, but I am not at that level. So, how could I
make this decision? This is satisfactory in the short run but in the long run, allocating my
resources 100% to grading and 0% to golf is totally unacceptable and would lead to a
stir-crazed teacher. In the long run, one must find a happy medium between work and
play.
Finally, draw a production possibilities curve (PPC) to show the competing objectives
you discussed. Also, develop a table showing the tradeoffs between the two activities.
Scale-out units of one on the y-axis and units of the other option on the x-axis. What are
the “production” combinations available? Plot those points, connecting the dots to draw
your curve. You can submit only the graph and table in person.
Answer the following 4 essays (each worth 7 points)
2. Contrast the differences between a market system and a command economy. Describe
each system using the three basic economic questions.
3. In your personal life, describe a situation where you face SCARCITY. What are the
major differences between scarcity and shortage? Describe the 4 economic resource
categories and how they relate to the scarcity problem. Explain opportunity cost.
How does it reflect scarcity? What does it have to do with decision-making?
4. Countries that have comparative advantages in producing products control the export
market. Discuss at least 5 industries in which the U.S. used to have a comparative
advantage. Discuss 3 industries that the U.S. currently has a comparative advantage
over most countries.
5. Discuss the four determinants of elasticity. Give examples in each case.