(a) Explain what happens in the simple circular flow diagram? (b) What effect do price controls have on the market system?

3. (a) Explain what can we learn from a country’s production possibilities curve? (b) How can a nation production possibilities curve shift inward? (c) Why the production possibilities cure is bowed-out in shape?

4. Will a nation tend to export or import goods for which it has comparative advantage? Explain.

5. How can we measure the opportunity cost of producing a good? Using a bowed outward production possibilities curve between ice cream and hammers, identify graphically the opportunity cost of obtaining an additional hammer.

6. Does economic growth eliminate scarcity? Why