Exam 3: Exchange and Markets

Define the term "export."

Consider two individuals, Ozzy and Sharon, who produce toy boats and yoyos. Ozzy's and Sharon's hourly productivity are as follows: Who has the absolute advantage or comparative advantage in the production of yoyos or boats?

The cost savings from outsourcing often lead to ________ for consumers and ________ for the outsourcing company.

Market failure occurs when

If a person has a comparative advantage in some activity, she must have an absolute advantage in that activity as well.

The market system works by getting each person, motivated by his or her own self-interest, to produce products for other people.

Exports are products produced in the home country and sold in another country.

Table 3.4 -Consider two individuals, Artie and Deena, who produce wind chimes and sun dials. Artie's and Deena's weekly productivity are shown in Table 3.4. Which of the following is true?

Table 3.3 -Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel's and Mia's hourly productivity are shown in Table 3.3. Which of the following is true?

Absolute advantage occurs when one producer has greater productivity compared to another producing the same product.

In a market economy, what encourages firms to develop new products and production processes?

Under a market system, the people with information about buyers' desires, production technology and resources make the decisions.

Table 3.1 -Based on the data in Table 3.1

A comparative advantage is the ability of one person or nation to produce a good at an opportunity cost that is lower than that of another person or nation.

Trade is only beneficial if a nation has an absolute advantage in producing all products.

Recall the Application about the market for meteorites to answer the following question(s). -According to the Application, people in Morocco bring meteorites picked up in the desert to local dealers, who then sell them to the public through Websites. If the Moroccan government decided to intervene in this market by requiring all meteorites be turned over to the government, and then the government decides who is allowed to purchase the meteorites and at what prices, this best describes an example of

Markets exist

If Eddie can produce 40 milk shakes or 20 banana splits in an hour, and Tina can produce 30 milk shakes or 16 banana splits in an hour, then Eddie has a comparative advantage in producing milk shakes.

In a market system, what provides individuals the information needed to make decisions?

Trade will be beneficial for a nation with a comparative advantage in producing a certain product.