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

Figure 2-18 -Refer to Figure 2-18. Which two arrows in the diagram depict the following transaction: Carter earns a $400 commission for selling men's designer shoes at Brooks Brothers.

Scarcity

Figure 2-14 Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-14. Which country has a comparative advantage in the production of snow cones?

The opportunity cost of taking an on-line history class is

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.

On a diagram of a production possibilities frontier, opportunity cost is represented by the production possibilities frontier shifting outward.

In a two-good, two country world, if one country has a comparative advantage in the production of one good, it can benefit by trading with the other country.

In the circular flow model, producers

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

Table 2-1 Production choices for Tomaso's Trattoria -Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. -Refer to Figure 2-8. Suppose Vidalia is currently producing 60 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized?

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 movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents economic growth?

Figure 2-10 -Refer to Figure 2-10. If the economy is currently producing at point E, what is the gain in production if the economy moves to point D?

Table 2-18 Table 2-18 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. -Refer to Table 2-18. What is Mickey's opportunity cost of making an umbrella?

Table 2-8 -Refer to Table 2-8. The Nut House produces only cashews and almonds. The table above shows the maximum possible output combinations of the two nuts using all resources and currently available technology. a. Graph the Nut House's production possibilities frontier. Put almonds on the horizontal axis and cashews on the vertical axis. Be sure to identify the output combination points on your diagram. b. Suppose the Nut House is currently producing at point C. What is the opportunity cost of producing an additional 12,000 pounds of almonds? c. Suppose the Nut House is currently producing at point C. What happens to the opportunity cost of producing more and more almonds? Does it increase, decrease or remain constant? Explain your answer. d. Suppose the Nut House is currently producing at point F. What happens to the opportunity cost of producing more and more cashews? Does it increase, decrease or remain constant? Explain your answer. e. Suppose the Nut House is plagued by a variety of white root-rot disease, which destroys cashew trees but not almond trees. Show in a graph what happens to its PPF.

Figure 2-12 Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-12. What is the opportunity cost of producing one gallon of milk in Tahiti?

Table 2-16 Table 2-16 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-16. What is Estonia's opportunity cost of producing one board foot of lumber?

A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

The unattainable points in a production possibilities frontier are