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

The basis for trade is comparative advantage, not absolute advantage.

Table 2.5 Digital Camera Wheat (bushels) China 100 hours 5 hours South Korea 90 hours 3 hours -Refer to Table 2.5.This table shows the number of labor hours required to produce a digital cameras and a bushel of wheat in China and South Korea. a.Which country has an absolute advantage in the production of digital cameras? b.Which country has an absolute advantage in the production of wheat? c.What is China's opportunity cost of producing one digital camera? d.What is South Korea's opportunity cost of producing one digital camera? e.What is China's opportunity cost of producing one bushel of wheat? f.What is South Korea's opportunity cost of producing one bushel of wheat? g.If each country specializes in the production of the product in which it has a comparative advantage, who should produce digital cameras? h.If each country specializes in the production of the product in which it has a comparative advantage, who should produce wheat?

A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

Each person goes about her daily business seeking to maximize her own self interests.In doing so, she contributes to the welfare of society at large.This is the idea underlying Adam Smith's "invisible hand."

Which of the following statements about an entrepreneur is false?

The attainable production points on a production possibility curve are

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

What shape does a production possibilities frontier take if it displays increasing opportunity costs? What shape does a production possibilities frontier take if it displays constant opportunity costs? Which shape is most common in production situations? Why are both types presented in the text?

How do firms and households interact in markets?

Figure 2.6 Toyota finds the emission standards too difficult to meet to bring its diesel-engine offerings to North America. They have instead focused their research on hybrid-engine technology. Assume Toyota chooses to produce both hybrid-engine vehicles and diesel-engine vehicles for its Prius brand. Figure 2.6 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. -Refer to Figure 2.6.In response to changing consumer demands, Toyota has cut back on the production of hybrids and increased its production of diesel-powered vehicles.This strategy is best represented by the

All of the following are examples of spending on factors of production in the circular flow model except

Which of the following would shift a nation's production possibilities frontier outward?

Which of the following are separate flows (shown in different parts of the model)in the circular flow model?

Table 2.1 Production choices for Tomaso's Trattoria Choice Quantity of Pizzas Produced Quantity of Calzones Produced A 48 0 B 36 15 C 24 30 D 12 45 E 0 60 -Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.A combination of 36 pizzas and 30 calzones would appear

Scarcity

An example of a factor of production is

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves.If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

Consider the following items: a)the novel "The DaVinci Code" by Dan Brown b)"The Spirited Shipper," an innovative wine shipping box c)a Swiss chef's award-winning recipe d)an original fabric design, for example, the fabric used for "Coach" bags and luggage Which of the items listed is an example of intellectual property?

Figure 2.9 -Refer to Figure 2.9.One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A.What is market C and who are economic agents A?

An outward shift of a nation's production possibilities frontier represents