# Foundations of Macroeconomics Ch 2 The Economic Problem

Feb 3rd, 2012
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Representatives Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable fuels, with some rights to emit to be auctioned. The Congressional Budget Office estimated that the government would receive \$846 billion from auctions and would spend \$821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend \$208 million a year to comply with the new rules. (Think of these dollar amounts as dollars’ worth of other goods and services.) 1. Would the Waxman-Markey law achieve production efficiency?

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TheEconomicProblem Chapter3ANSWERS TO CHAPTER CHECKPOINTS?Study Plan Problems and Applications1.The table shows the quantities of corn and beef that a farm can produce in a year. Draw a graph of the farm's PPF. Mark on the graph:An inefficient combination of corn and beef-label this point A.An unattainable combination of corn and beef-label this point B.An efficient combination of corn and beef-label this point C.The production possibilities frontier is illustrated in Figure 3.1. Any production point in the interior of the PPF, such as the point marked A, is an inefficient combination of corn and beef. Any production point beyond the PPF, such as the point marked B, is an unattainable combination of corn and beef. Any production point on the PPF, such as the point marked C is a production efficient combination of corn and beef.Use the following information to work Problems 2 and 3.The people of Leisure Island have 50 hours of labor a day that can be used to produce entertainment and good food. The table shows the maximum quantity of either entertainment or good food that Leisure Island can produce with different quantities of labor.2.Is an output of 50 units of entertainment and 50 units of good food attainable and efficient? With a production of 50 units of entertainment and 50 units of good food, do the people of Leisure Island face a tradeoff?Producing 50 units of good food and 50 units of entertainment is attainable. However, at this produc

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