Chapter 1

In recent years, Zimbabwe has had hyperinflation, with prices tripling (or more!) every month. According to what you learned in this chapter, what do you think the government can do to end this hyperinflation?

#2

Some people worry that machines will take jobs away from people, making people permanently unemployed. In the United States, only 150 years ago most people were farmers. Now, machines do almost all of the farm work and fewer than 2% of Americans are farmers, yet that 2% produces enough food to feed the entire country while still exporting food overseas.

a. What happened to all of those people who used to work on farms? Do you think most adult males in the U.S. are unemployed nowadays, now that the farm work is gone?

b. Some people say that it's okay for machines to take jobs, since we'll get jobs fixing the machines. Just from looking around, do you think that most working Americans are earning a living by fixing farm equipment? If not, what do you think most working people are doing instead? (We'll give a full answer later in this book.)

#3

Let's connect Big Ideas Six and Nine: Do you think that people in poor countries are poor because they don't have enough money? In other words, could a country get richer by printing more pieces of paper called "money" and handing those out to its citizens?

Page 12 #5

According to the United Nations, there were roughly 300 million humans on the planet a thousand years ago. Essentially all of them were poor by modern standards: They lacked antibiotics, almost all lacked indoor plumbing, and none traveled faster than a horse or a river could carry them. Today, between 1 and 3 billion humans are poor out of about 7 billion total humans. So, over the last thousand years, what has happened to the fraction of humans who are poor: Did it rise, fall, or stay about the same? What happened to the total number of people living in deep poverty: Rise, fall, or no change?

P. 12 #1

We claim that part of the reason the Great Depression was so destructive is because economists didn't understand how to use government policy very well in the 1930s. In your opinion, do you think that economists during the Great Depression would have agreed? In other words, if you had asked them why the Depression was so bad, would they have said, "Because the government ignored our wise advice," or would they have said, "Because we don't have any good ideas about how to fix this?" What does your answer tell you about the confidence of economists and other experts?

P. 22 #2

Chapter 2

In the Wealth of Nations, Adam Smith said that one reason specialization makes someone more productive is because "a man commonly saunters a little in turning his hand from one sort of employment to another." How can you use this observation to improve your pattern of studying for your four or five college courses this semester?

P. 23 #2

Nobel Laureate Paul Samuelson said that comparative advantage is one of the few ideas in economics that is both "true and not obvious." Since it's not obvious, we should practice with it a bit. In each of the cases below, who has the absolute advantage at each task, and who has the comparative advantage?

a. In 30 minutes, Kana can either make miso soup or she can clean the kitchen. In 15 minutes, Mitchell can make miso soup; it takes Mitchell an hour to clean the kitchen.

b. In one hour, Ethan can bake 20 cookies or lay the drywall for two rooms. In one hour, Sienna can bake 100 cookies or lay the drywall for three rooms.

c. Kara can build two glass sculptures per day or she can design two full-page newspaper advertisements per day. Sara can build one glass sculpture per day or design four full-page newspaper ads per day.

d. Data can write 12 excellent poems per day or solve 100 difficult physics problems per day. Riker can write one excellent poem per day or solve 0.5 difficult physics problems per day.

#5

Many people talk about manufacturing jobs leaving the United States and going to other places, like China. Why isn't it possible for all jobs to leave the United States and go overseas (as some people fear)?

#6

Suppose the table below shows the number of labor hours needed to produce airplanes and automobiles in the United States and South Korea, but one of the numbers is unknown.

Number of Hours to Number of Hours to

South Korea United States

Produce One Airplane

2,000 800

Produce One Auto

? 5

a. Without knowing the number of labor hours required to produce an auto in South Korea, you

can't figure out which country has the comparative advantage in which good. Can you give an example of a number for the empty cell of the table that would give the United States the comparative advantage in the production of airplanes? What about South Korea?

b. Who has the absolute advantage in the production of airplanes? What about autos?

c. What exact number would you have to place in the empty cell of the table for it to be impossible that trade between the United States and South Korea could benefit both nations?

P. 25

#2

Go to www.Ted.com and watch Thomas Thwaites's talk, "How I built a toasterfrom scratch." How much money and time do you think Thwaites spent building his toaster? How long do you think it would have taken Thwaites to earn enough money in, say, a minimum wage job to buy a toaster? Comment on the division of labor and the importance of specialization in increasing productivity.