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

Table 2-10 Table 2-10 shows the output per month of two people, Fred and Barney. They can either devote their time to making pogo sticks or making unicycles. -Refer to Table 2-10. Which of the following statements is true?

In the desire to have a celebrity's image protected to prevent it from being used in ways he would not approve, a celebrity's estate

A welding machine is an example of a factor of production if it is being used to produce automobiles.

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other.

Table 2-12 Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. -Refer to Table 2-12. Honduras has a comparative advantage in the production of

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. The linear production possibilities frontier in the figure indicates that

Figure 2-3 -Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities frontier that displays increasing opportunity costs?

Table 2-12 Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. -Refer to Table 2-12. What is Honduras's opportunity cost of producing one canoe?

Figure 2-13 Figure 2-13 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. -Refer to Figure 2-13. Which country has a comparative advantage in the production of pineapples?

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

Table 2-11 Table 2-11 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2-11. What is China's opportunity cost of producing one digital camera?

If additional units of a good are produced at an increasing opportunity cost, the production possibilities frontier would be bowed outward (concave).

Table 2-6 -Refer to Table 2-6. The Fruit Farm produces only apples and pears. The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology. a. Graph the Fruit Farm's production possibilities frontier. Put apples on the horizontal axis and pears on the vertical axis. Be sure to identify the output combination points on your diagram. b. Suppose the Fruit Farm is currently producing at point D. What is the opportunity cost of producing an additional 8,000 pounds of pears? c. Suppose the Fruit Farm is currently producing at point D. What happens to the opportunity cost of producing more and more pears? Does it increase, decrease, or remain constant? Explain your answer. d. Suppose the Fruit Farm is currently producing at point G. What happens to the opportunity cost of producing more and more apples? Does it increase, decrease, or remain constant? Explain your answer. e. Suppose the Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pear trees. Show in a graph what happens to its PPF.

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

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. What is the opportunity cost of producing 1 snow cone in Greenland?

Which of the following is a factor of production?

Table 2-3 Production Choices for Dina's Diner -Refer to Table 2-3. Dina faces ________ opportunity costs in the production of sliders and hot wings.

In a production possibilities frontier, a point inside the frontier is

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.