Exam 2: Economic Models: Trade-Offs and Trade 25

When a nation's economy grows:

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if:

The effect of an increase in productive inputs such as labor and capital can be shown by:

Use the following to answer questions: Figure: Guns and Butter -(Figure: Guns and Butter) Look at the figure Guns and Butter. If the economy is operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce 18 pounds of butter:

Use the following to answer questions: -(Table: Coffee and Salmon Production Possibilities II) Look at the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon, both measured in pounds, that Brazil and Alaska can produce if they just produce one good. Brazil has an absolute advantage in producing:

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. With specialization, _____ brownies and _____ cookies will be made in one day.

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

The slope of a straight line is the ratio of the:

Consider a nation with a large economy, like the United States, and a nation with a small economy, like the Dominican Republic. How can the United States, with absolute advantage in production of almost all goods, benefit from trade with the Dominican Republic?

Statements that make value judgments are:

A town hires more police officers and then has an increase in arrests. One can conclude that the larger police force caused more crime.

Use the following to answer questions: Figure: Consumer and Capital Goods -(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Technological improvements will likely:

Free trade between countries:

Use the following to answer questions: -(Table: Comparative Advantage I) Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of cell phones for Sweden is _____ box(es) of herring.

Use the following to answer questions: Figure: Comparative Advantage Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. -(Figure: Comparative Advantage) Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of peaches for Westland is _____ box(es) of oranges.

Use the following to answer questions: -(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. If an economy is producing at X, the opportunity cost to it of producing at Y is _____ units of consumer goods per period.

A scatter diagram shows:

Use the following to answer questions: Figure: Comparative Advantage Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. -(Figure: Comparative Advantage) Look at the figure Comparative Advantage. Westland has a comparative advantage in producing:

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:

Use the following to answer questions: Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all of its resources to produce steel, it can produce 250 tons of steel and no wheat. If country B spends all of its available resources producing wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the production of steel, it can produce 400 tons of steel. -(Scenario: Countries A and B) Look at the scenario Countries A and B. Given this information, country _____ has a comparative advantage in the production of wheat, and country _____ has a comparative advantage in the production of steel.