CHAPTER 2
Discussion Questions
3. There are several possible answers to this question—the question is designed to get students to think about these differences before using models. One straightforward answer is that the factors of production in Maryland produce output that is worth more than what is produced in Mississippi. This could be because labor is more productive in Maryland because of a better educated workforce.
5. No, it isn’t. While there are many small businesses in the U.S. economy, the value of what they produce is relatively small. For example, a local grocer cannot produce the same amount as a large national grocery store. It would take several small grocers to match the production of a large store. So, while a large retailer like Wal-Mart is considered to be one business, its production exceeds that of a smaller business.
6. The government is a referee—it enforces laws and establishes order. The government is a business regulator—it imposes restrictions on businesses on society’s behalf. The government provides security through national defense. The government levies taxes to finance its spending. Finally, the government redistributes income from high income households to lower-income ones.