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Fundamental Economics in The Lorax

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Margarita Medina

on 16 November 2014

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Transcript of Fundamental Economics in The Lorax

Fundamental Economics in The Lorax
Question 1
1. Describe how the Truffula trees represent the concept of scarcity.

The Truffula trees represent scarcity because there is a limited amount of them and they are wanted.

Question 2
2. Give examples of each of the four factors of production found in the Lorax:
a. Physical Capital
The super-axe hacker
b. Entrepreneurship
The Once-ler
c. Human Capital (Labor)
The Once-ler’s family
d. Natural Resources (Land)
The Truffula trees

Question 4
4. Identify a possible opportunity cost of producing a Thneed.


An opportunity cost of producing a Thneed is the fruit of the Truffula trees.

Question 3
3. Find and identify two examples of allocation and describe how each is shown in the story.


The Once-ler uses force to obtain the Truffula trees. The Once-ler sells the first Thneeds he makes.

Question 5
By: Lilia Enriquez and Margarita Medina
Question 6
6. Would you describe the Once-lers actions as rational? Why or Why Not? Include the terms marginal benefits and marginal costs in your explanation.



The Once-ler’s actions were not rational. He got to the point where his marginal cost beat his marginal benefit, yet he still kept going. He finally lost all the Truffula trees after he cut the last one down; he destroyed any benefit once he did this.

Question 7
7. Explain how the Once-ler’s business shows the following concepts:


a. Specialization
The Once-ler had machines to do specific things within the factory. He had people running all sorts of machines: machines for boxing, machines actually making the thneeds, and machines to cut down the thneeds.

b. Comparative Advantage
The Once-ler has a comparative advantage in producing thneeds because he has all the machines and everything to produce them, so he can produce more thneeds than anyone else.

Question 8
8. Is the Once-ler’s business an example of a voluntary, non-fraudulent exchange? Justify your answer.



The Once-ler’s production and distribution of the thneeds is voluntary and non-fraudulent, because people are voluntarily giving up their money to buy thneeds. However how the Once-ler obtains the Truffula trees is completely non-voluntary. He basically has to rip them away from the Lorax.

Question 9
9. How did the Once-ler answer the 3 basic economic questions?

i. What to produce
The Once-ler produced Thneeds

ii. How to produce
The Once-ler decided to produce thneeds at first by hand sewing them. His thneeds became more popular so he built a factory to produce them more efficiently.

iii. For Whom to produce
He produced thneeds for anyone willing to buy one.

Question 10
10. Would you describe the Once-ler’s business as a sole proprietorship, partnership, or corporation? Justify your answer.
The Once-ler has a corporation. He mentions the company stock at one point in the movie.

a. What problems might the Once-ler have because of his business type?
A problem with corporations is that they have a vely costly start-up.

b. What benefits might the Once-ler have because of his business type?
A benefit from being part of a corporation is that you do not have all the blame if the company goes under.

Question 11
11. Which market structure would you describe the
Once-ler’s business as? Pure Competition, Monopolistic Competition, Oligopolistic, or Monopolistic? Justify your answer.



The Once-ler’s business is Monopolistic. He has a unique product, and he was the only one producing it. He has all the control for the production of thneeds.

Question 12
12. What economic system exists in the Lorax? Market, Mixed, or Command? Explain your rationale (reasoning) for your answer using the following terms:
In the Lorax there is a market economic system. This known because there is no government in the Lorax, so it cannot be a command economy.

a. private ownership
The Once-ler started his own business and built it up from there.

b. profit motive
The Once-ler began the thneed company because he wanted money.

c. consumer sovereignty
The consumers had the choice to buy thneeds or not.

d. competition
There was not a lot of competition, but it was only because no one started another company.

e. government regulation
There was no government, so there could not be any regulations.

Question 13
13. How well did the economic system in the Lorax meet the social and economic needs of:

a. Freedom
Consumers had the freedom to choose what they wanted to buy. However the Lorax did not get the freedom to protect the trees. Also all the characters in the Lorax had the freedom to produce what they wanted.
b. Security
There was no security in the Lorax. The Once-ler lost everything at the end of the movie.
c. Equity
Everyone has the same opportunity as the Once-ler to become famous. The characters all had an equal opportunity to produce anything they wanted.
d. Efficiency
The Once-ler was very efficient, and produced thneeds as fast as he could.
e. Stability
The economy in the Lorax was stable until the Truffula trees were all gone.
Question 14
Question 15
Question 16
14. Explain how private property rights might have changed the outcome of the Lorax.

The Lorax could have owned all the Truffula trees. This would in turn cause the Once-ler to have to buy trees in order for him to produce Thneeds. The Lorax would not have sold all the Truffula trees which means there would still be animals and Truffula trees in the end.
15. Identify a market failure evident in the Lorax. Justify your answer.

In the Lorax Market failure is present because the Once-ler does not allocate the Truffula trees properly. His abuse of the tree ultimately leads to the failure of his company. If he had cared for these scarce resources he might have still had a company.
16. What government regulations keep the market failure you identified in #15 from happening in the US

We have government regulations in place so that we will never run out of scarce resources. They have regulation to control things such as healthcare which is scarce.

Question 17
17. How was the Once-ler able to increase his productivity?
He invented new machinery, so that he could keep up with demand.
a. Give explanations of investment in equipment and technology and explain their relationship to the growth of the Once-ler’s business.
He invested in things like the Super axe hacker which chopped down four Truffula trees at once. Now that he had more Truffula trees to work with he could produce 4 before having to cut down more.

Question 18
Question 19
19. Identify the form of unemployment experienced by the following:
a. The Lorax
Cyclical because he has nothing left to protect, so he is out of a job
b. The Once-ler
Structural because he has nothing to do now that there is no more Truffula trees. He no longer has the skills necessary to keep up now that people do not need thneeds.


Question 20
20. How did the incentive of profit play a role in the decisions the Once-ler made?

He wanted to make money. He found a product people needed and decided to make it, he sold them and made a profit.
Question 21
21. How would the Once-ler's standard of living at the end of be different if he had taken Mr. Purcell's economics class?

He would have had a higher standard of living. He would have know marginal benefits and cost, and he would not have chopped all the trees down. He would have known that the truffula trees are scarce, and that he needed to allocate them better. The Once-ler would have been better of of he knew something about economics.
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