Chat with AIExam 2: The Production Possibility Model, Trade, and Globalization
Which of the following factors will help the United States regain comparative advantages in industries in which it has lost comparative advantages?
(70) 
VerifiedA
Draw a production possibilities curve that indicates how you might divide up 10 hours of study time between your economics and accounting midterm exams.Put expected grade in economics on the horizontal axis and expected grade in accounting on the vertical axis.If you don't study at all,you expect to make a 70 on both exams.For every one additional hour of studying economics,your exam grade rises by 3 points.The same is true for accounting.
a.What is the opportunity cost of studying one extra hour for your economics exam?
b.What is the opportunity cost of studying one extra hour for your accounting exam?
c.Can the production possibility curve shift? Explain.
(74) VerifiedThe diagram below 
If you allocate all available studying time for economics,you will make a 100 on the test (70 + 3 times 10).Similarly,if you don't study economics and allocate all your time to accounting,you will make a 100 on the accounting exam.Therefore,the shape of the production possibilities curve is as shown above.
(a)The opportunity cost of one hour of studying economics is one hour of studying accounting,which means the loss of 3 points on the accounting exam.
(b)The opportunity cost of one hour of studying accounting is one hour of studying economics,which means the loss of 3 points on the economics exam.
(c)Yes,the production possibilities curve may shift.If you allocate more time to studying or if you developed a method that would make your studying time more productive,the curve will shift in such a way that it might be possible to get 100 in both courses.In this case,it would not be a parallel shift.
What is the "law of one price"? Explain how outsourcing is part of a global process guided by the law of one price.
(76) VerifiedThe law of one price states that the wages of workers in one country will not differ significantly from workers of equal skill in institutionally similar countries.
Outsourcing frightens many American workers because wages in developing countries are much lower than those in the United States.Some fear that the United States will not have a comparative advantage in anything.But that is not possible.The United States will have a comparative advantage in innovative goods that pay higher wages.But in time,foreign nations will catch up technologically.
According to the law of one price,the U.S wage premium will have to decline in order to regain its comparative advantage.This has begun to happen over the last twenty years as U.S.manufacturing wages have remained constant while foreign wages have risen significantly.This can be expected to continue,and is not a happy prospect for American workers.If,however,the United States tries to prevent outsourcing with trade restrictions,U.S.based companies will find that they cannot compete internationally.
Short Answer Questions
Given a production possibility curve for good X (on the x-axis)and good Y (on the y-axis), the opportunity cost of increasing good X is greatest when the slope of the production possibility curve is:
(85) Below is a picture of a production possibilities curve that shows two products Professor Colander (your textbook author)might produce during any given day. 
Does this PPC illustrate the principle of increasing marginal opportunity cost? Explain.
Does this PPC illustrate the principle of increasing marginal opportunity cost? Explain. (91) In China, many farmers have switched from producing rice to producing vegetables and fruit because they can earn a great deal more money from these specialty crops. Within China, there are some who applaud this change, but others worry that China soon may become dependent on rice imports. Even with the low cost of Chinese labor, does the fact that China is importing rice suggest that other countries now have a comparative advantage in rice production?
(85) Adam Smith argued that greater specialization and division of labor are likely to:
(84) Using production possibilities curves,demonstrate increasing marginal opportunity cost and constant marginal opportunity cost.
(77) When you produce cars, it is enormously expensive to produce one car, but ultimately the costs per car decrease as more are produced. This would be an example of:
(74) A downward-sloping line that makes a 45-degree angle with the horizontal and vertical axes has a slope of:
(88) John can clean the house in three hours and do the laundry in four. Jane can clean the house in two hours or do the laundry in two. Can they benefit by specialization and trade?
(84) Most advanced nations have both agricultural sectors and armaments industries.They do not completely specialize in one industry or the other;but generally produce some of both commodities.
(a)State the principle of increasing marginal opportunity cost.
(b)Is this incomplete specialization consistent with the principle of increasing opportunity costs? Explain your answer in the context of the tradeoff between guns and butter.
(72) If the quantity demanded for a good rises as the price falls, the curve representing this relationship will be:
(77) Given the production possibility tables for the First and Second Bakeries shown, we know that the opportunity cost of producing cookies: First Bakery Second Bukery Conkies Pies Conkies Pies 0 18 0 9 10 12 30 6 20 6 60 3 30 0 90 0
(79) Suppose New Zealand uses one unit of labor to produce a kiwi and two units of labor to produce an apple. Suppose Australia uses two units of labor to produce a kiwi and one unit of labor to produce an apple. In this case, New Zealand:
(85) 
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