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

Bangladesh produces much of the clothing we wear because it can produce more clothes than the United States.

A simplified representation that is used to study a real situation is called a(n):

Use the following to answer questions: Figure: Production Possibility Frontier -(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. If the economy is operating at point B, producing 16 cars and 12 computers per period, a decision to move to point E and produce 18 computers:

To achieve the gains from trade, each nation should specialize in the production of a good or service if:

Economists use models to explain real-life situations because:

Use the following to answer questions: Figure: Production Possibility Frontier -(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. If the economy is producing 8 cars and 12 computers per period:

The principle of comparative advantage suggests that if New York and Florida exchange taxi parts for oranges, each state will be made worse off.

The simplest circular-flow model shows the interaction between households and firms. In this model:

In 2000, the market for mortgage-backed securities:

Suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. The bowed-out production possibility frontier suggests that there will be a(n) _____ opportunity cost of producing more steel.

In the circular-flow diagram the flow of money going into each sector or market is _____ the flow of money coming out of that market or sector.

Use the following to answer questions: Scenario: Linear Production Possibility Frontier Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor. The table shows the number of hours of labor necessary to produce one pair of socks or one shirt. -(Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. What is the maximum number of pairs of socks Largetown can produce?

Use the following to answer questions: Figure: Cold Drinks Sold and Temperature -(Figure: Cold Drinks Sold and Temperature) Look at the figure Cold Drinks Sold and Temperature. If we move from point C to point E in the figure, the outside temperature has ______ degrees and the number of cold drinks sold has ______.

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 alternative W, the opportunity cost of producing at X is _____ unit(s) of consumer goods per period.

Economic models that make unrealistic assumptions may be useful in analyzing some economic problems.

Economic models often:

Use the following to answer questions: Figure: Guns and Butter -(Figure: Guns and Butter) Look at the figure Guns and Butter. On this figure, points A, B, E, and F:

Use the following to answer questions: Figure: Strawberries and Submarines II -(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Suppose the economy is operating at point B. Achieving production at point F would require that the economy:

In the circular-flow diagram firms receive money for _____ in the _____ market.

Use the following to answer questions: -(Table: Crab and Cake Production in Chesapeake) Look at the table Crab and Cake Production in Chesapeake. What is the opportunity cost of increasing the production of crabs from zero to 100? What is the opportunity cost of increasing the production of crabs from 400 to 500? Explain the difference in your answers.