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

Table 2.2 Possible Output Combinations Apples (thousands of pounds) Pears (thousands of pounds) A 70 0 B 60 20 C 50 36 D 40 48 E 30 56 F 20 60 G 10 63 H 0 65 -Refer to Table 2.2.The Fruit Farm produces only apples and pears.The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology. a.Graph The Fruit Farm's production possibilities frontier.Put apples on the horizontal axis and pears on the vertical axis.Be sure to identify the output combination points on your diagram. b.Suppose The Fruit Farm is currently producing at point D.What is the opportunity cost of producing an additional 8,000 pounds of pears? c.Suppose The Fruit Farm is currently producing at point D.What happens to the opportunity cost of producing more and more pears? Does it increase, decrease or remain constant? Explain your answer. d.Suppose The Fruit Farm is currently producing at point G.What happens to the opportunity cost of producing more and more apples? Does it increase, decrease or remain constant? Explain your answer. e.Suppose The Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pears.Show in a graph what happens to its PPF.

In the circular flow model, households supply resources such as labour services in the product market.

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.Assume that in 2015, Toyota was able to reopen one of its factories after an extensive remodelling which now allows for the production of both types of vehicles.This is best represented by the

What is comparative advantage? What is absolute advantage?

Figure 2.4 Figure 2.4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2.4.A movement from X to Y

Figure 2.11 -Refer to Figure 2.11.Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

Figure 2.4 Figure 2.4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2.4.A movement from Y to Z

The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by

Table 2.4 One Digital Camera Wheat (per pound) China 100 hours 4 hours South Korea 60 hours 3 hours Table 2.4 shows the number of labour hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2.4.What is South Korea's opportunity cost of producing one digital camera?

The opportunity cost of taking a semester-long economics class is

In a report made to the Canadian Parliament in 2002, The Standing Senate Committee on Social Affairs, Science and Technology cautioned that increased health spending could lead to reduced debt reduction.This statement suggests that