Exam 2: Economic Models: Trade-Offs and Trade

In one day, Kessy can bake 10 cookies or mix 15 glasses of lemonade. His friend Ava can make 10 cookies or 10 glasses of lemonade. His other friend, Ian, can make 10 cookies or 20 glasses of lemonade. Who has the LOWEST opportunity cost in cookie production?

In a single day, George can bake 10 cakes and Greta can bake 5 cakes. We know that _____ has a(n) _____ advantage in baking cakes.

Use the following to answer questions: \\ -(Table: Wheat and Aluminum) Use Table: Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table:

Which statement is normative?

In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessy has a larger oven and refrigerator. How does this affect his production possibility frontier?

The production possibility frontier will NOT shift outward due to an:

Use the following to answer questions: -(Figure: Seasonally Adjusted Unemployment Rate) Use Figure: Seasonally Adjusted Unemployment Rate. The distance between each labeled point on the horizontal axis is one year, and the distance between each labeled point on the vertical axis is one percentage point of unemployment. What is the approximate slope of the graph between 1/2001 and 1/2003 (using percentage point and years as the units on the vertical and horizontal axes, respectively)?

Which statement is normative?

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. Based on this information, _____ has the absolute advantage in making brownies and _____ has the absolute advantage in making cookies.

Economists who are asked to choose between two government policies may disagree because:

Use the following to answer questions: \\ -(Figure: Sugar and Freight Trains) Use Figure: Sugar and Freight Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be _____ tons of sugar.

Use the following to answer questions: \\ -(Figure: Unemployment Rate over Time) Look at the figure Unemployment Rate over Time. In the time-series graph, as we move from the beginning of 2001 to the beginning of 2003, we see that the unemployment rate has _____ from approximately _____ to approximately _____.

Use the following to answer questions: \\ -(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. If the economy produces 4 units of consumer goods per period, it also can produce, at MOST, _____ units of capital goods per period.

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:

Use the following to answer questions: \\ -(Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose the student completes a speed-reading course that allows him to do the same amount of studying in half as many hours. His opportunity cost:

Use the following to answer questions: \\ -(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. The opportunity cost of producing the third unit of consumer goods is _____ units of capital goods.

Suppose residents of Montana operate on their production possibility frontier, and they want to increase production of both wheat and fly-fishing rods. According to the production possibility frontier, this cannot happen without new resources or technological improvement.

Use the following to answer questions: \\ -(Figure: Strawberries and Submarines II) Use Figure: Strawberries and Submarines II. Assume that the economy is operating at point A. The opportunity cost of moving to point C is equal to _____ million tons of strawberries:

If they bake only cakes, in a single day George can bake 10 cakes, and Greta can bake 5 cakes. If they make only pies, in a single day George can bake 10 pies, while Greta can bake 4 pies. We know that _____ has an absolute advantage and a comparative advantage in making _____.

Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow, this is an example of a: