Q-1 Suppose you are assigned the task of determining the route of a new

highway through an older section of town. The highway will require that
many older homes must be either relocated or torn down. Two possible
criteria that might be used in deciding exactly where to locate the highway
are:
a. Ensure that there are benefits to those who gain from the decision and
that no one is harmed by the decision.
b. Ensure that the benefits to those who gain from the decision are greater
than the losses of those who are harmed by the decision.

Which criterion will you select to use in determining the route of the highway?
Explain Why?

In economics, our criteria is to reduce the cost and get maximum benefits .As the
highway has to be build which would surely benefit the others. We can expect few
losses and maximum benefit.
In option (a) as benefit is not much and also no harm which is not suitable as benefit
has to be maximum.
In option (b) as there is maximum benefits and loss is much less as compared to
benefits I would go with option (b)

Q-2 Explain how (if at all) each of the following events affects the location of a
country’s production possibilities curve:
Draw Graphs with brief explanation.

a. The quality of education increases.

b. The number of unemployed workers increases.
c. A devastating earthquake destroys numerous production facilities.
d. A new technique improves the efficiency of extracting copper from
ore.
ANSWERS:
Answer:
(a) Assuming better education translates into better work skills, then productivity should rise and
this would shift the curve outward.
(b) Should not affect location of curve. Production moves inward, away from the curve.

(c) The curve should shift outward as more production is possible with existing resources.

(d) The curve should shift inward with the destruction of resources (capital).