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

An inward shift of a nation's production possibilities frontier can occur due to

Figure 2.3 -Refer to Figure 2.3.Sergio Vignetto raises cattle and llamas on his land.Half the land is more suitable for raising cattle and half the land is better suited for raising llamas.Which of the graphs in Figure 2.3 represent his production possibilities 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.

Figure 2.7 Figure 2.7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2.7.If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of cotton?

It is possible to have a comparative advantage in producing a good or service without having an absolute advantage.

Table 2.3 Serena Haley Bracelets 8 9 Necklaces 16 12 Table 2.3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. -Refer to Table 2.3.What is Haley's opportunity cost of making a bracelet?

To increase fuel efficiency, automobile manufacturers make cars small and light.Large cars absorb more of the impact of an accident than small cars but yield lower fuel efficiency.These facts suggest that a negative relationship exists between safety and fuel efficiency.

Which of the following statements about a simple circular flow model is false?

Figure 2.1 -Refer to Figure 2.1.Point B is

Figure 2.5 -Refer to Figure 2.5.If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should

If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave).

In 18th century Europe, governments gave guilds legal authority to limit production of goods.Did this authority obstruct or improve the market mechanism and how?

According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

Adam Smith's invisible hand refers to

Figure 2.3 -Refer to Figure 2.3.Sergio Vignetto raises cattle and llamas on his land.His land is equally suitable for raising either animal.Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Households

Comparative advantage means the ability to produce a good or service

Which of the following statements is true?

Figure 2.8 -Refer to Figure 2.8.One segment of the circular flow diagram in the figure shows the flow of labour services from market K to economic agents J.What is market K and who are economic agents J?