Exam 2: Trade-Offs, Comparative Advantage, and the Market System

Figure 2-5 -Refer to Figure 2-5. If the economy is currently producing at point X, what is the gain in production if the economy moves to point Y?

According to the production possibilities model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

Consider a country that produces only two goods: parrots and iguanas. Suppose it is impossible for this country to increase its production of parrots without producing fewer iguanas. In this case, its current output combination is efficient.

If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the

In a production possibilities frontier, a point ________ the frontier is productively inefficient.

Table 2-20 Table 2-20 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-20. What is Japan's opportunity cost of producing one pound of rice?

Which of the following is an example of spending on goods and services in the circular flow model?

A successful market economy requires

The ________ demonstrates the roles played by households and firms in the market system.

A successful market economy requires well defined property rights and

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from Z to V?

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking.

Is it possible for a firm to have a comparative advantage in producing something without having an absolute advantage? Why or why not?

a. Draw a production possibilities frontier for a country that produces two goods, beer and pretzels. Assume that resources are equally suited to both tasks. b. Define opportunity costs. c. Use your production possibilities frontier graph to demonstrate the concept of opportunity costs.

If Tanisha can audit more tax returns in one hour than Libby, then Tanisha has an absolute advantage in auditing tax returns.

An inward shift of a nation's production possibilities frontier can occur due to

In the circular flow model, households

Entrepreneurs bring together the factors of production to produce goods and services.

Suppose that in Belize, the opportunity cost of producing a sailboat is 5 hang gliders. In Honduras, the opportunity cost of producing a sailboat is 8 hang gliders. a. What is the opportunity cost of producing a hang glider for Belize? b. What is the opportunity cost of producing a hang glider for Honduras? c. Which country has a comparative advantage in the production of hang gliders? d. Which country has a comparative advantage in the production of sailboats?

________ a nation's production possibilities frontier represents economic growth.