No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Seven: Production: Man at Work 172 QUESTIONS FOR REVIEW 1. List the four factors of production and provide two examples of each. 2. The Nucor Corporation recycles scrap steel and is one of the largest steel companies in the world. Where would its product fall in the two production hierarchies of Figure 7.3 and Figure 7.4 ? If you can buy steel at Home Depot, does that make it a final consumer good? 3. If an entrepreneur wants to expand production, how does she decide how much of each of the factors of production to use? 4. In this chapter’s opening section of scripture, King Solomon ordered the use of 150,000 aliens to perform tasks necessary for the construction of the Temple, including 70,000 to haul loads. How would this decision likely have changed if the price of oxen and other beasts of burden dropped dramatically? 5. If a union is successful at raising wages, what is likely to happen to the company’s labor to capital ratio? 6. Assess the salary difference between your city policeman (or teacher) and your favorite sports figure from both an economic and a biblical view. 7. What does the law of diminishing returns suggest about doing an “all-nighter” studying for your economics exam? 8. Provide an example of how the law of diminishing returns may increase demand for an alternate factor of production. 9. Why isn’t your favorite fast food restaurant the same physical size as a Walmart store? 10. What is the biggest item missing from accounting costs that is included in economic costs? 11. Can you have an accounting profit and an economic loss? What would explain this? 12. Identify whether each of the following is a fixed or variable cost: a. A firm’s building insurance b. A firm’s property taxes c. A firm’s raw materials d. A firm’s labor force e. A firm’s machines that are used in production