ECON 1B03 Chapter Notes - Chapter 2: Global Affairs Canada, Invisible Hand, Jim Flaherty

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Many answers are possible. a. b. c. d. Steel is a fairly uniform commodity, though some firms produce steel of inferior quality. Novels are each unique, so they are quite distinguishable. Wheat produced by one farmer is completely indistinguishable from wheat produced by another. Fast food is more distinguishable than steel or wheat, but certainly not as much as novels. See figure 5, where the four transactions are shown. Figure 6 shows a production possibilities frontier between guns and butter. It is bowed out because when most of the economy"s resources are being used to produce butter, the frontier is steep and when most of the economy"s resources are being used to produce guns, the frontier is very flat. When the economy is producing a lot of guns, workers and machines best suited to making butter are being used to make guns, so each unit of guns given up yields a large increase in the production of butter.