Critical Thinking Questions

14 . What are the three main goals of macroeconomics? 15 . How did John Maynard Keynes define economics? 16 . Are households primarily buyers or sellers in the goods and services market? In the labor market? 17 . Are firms primarily buyers or sellers in the goods and services market? In the labor market? 18 . What are the three ways that societies can organize themselves economically? 19 . What is globalization? How do you think it might have affected the economy over the past decade?

Critical Thinking Questions

20 . Suppose you have a team of two workers: one is a baker and one is a chef. Explain why the kitchen can produce more meals in a given period of time if each worker specializes in what they do best than if each worker tries to do everything from appetizer to dessert. 21 . Why would division of labor without trade not work? 22 . Can you think of any examples of free goods, that is, goods or services that are not scarce? 23 . A balanced federal budget and a balance of trade are secondary goals of macroeconomics, while growth in the standard of living (for example) is a primary goal. Why do you think that is so? 24 . Macroeconomics is an aggregate of what happens at the microeconomic level. Would it be possible for what happens at the macro level to differ from how economic agents would react to some stimulus at the micro level? Hint: Think about the behavior of crowds. 25 . Why is it unfair or meaningless to criticize a theory as “unrealistic?” 26 . Suppose, as an economist, you are asked to analyze an issue unlike anything you have ever done before. Also, suppose you do not have a specific model for analyzing that issue. What should you do? Hint: What would a carpenter do in a similar situation? 27 . Why do you think that most modern countries’ economies are a mix of command and market types? 28 . Can you think of ways that globalization has helped you economically? Can you think of ways that it has not?

FIGURE 2.1Choices and Tradeoffs In general, the higher the degree, the higher the salary, so why aren’t more people pursuing higher degrees? The short answer: choices and tradeoffs. (Credit: modification of "College of DuPage Commencement 2018 107" by COD Newsroom/Flickr, CC BY 2.0)

In this chapter, you will learn about:

• How Individuals Make Choices Based on Their Budget Constraint
• The Production Possibilities Frontier and Social Choices
• Confronting Objections to the Economic Approach

BRING IT HOME Choices ... to What Degree? Does your level of education impact earning? Let’s look at some data from the Bureau of Labor Statistics (BLS). In 2020, among full-time wage and salary workers, median weekly earnings for those with a master’s degree were $1,545. Multiply this average by 52 weeks, and you get average annual earnings of $80,340. Compare that to the