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

Table 2-9 Serena Haley Bracelets 8 9 Necklaces 16 12 Table 2-9 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 2-9.What is Haley's opportunity cost of making a necklace?

Table 2-26 One Motorcycle One Guitar Wreland 10 hours 2.5 hours Scotland 9 hours 2 hours -Refer to Table 2-26.This table shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland.

If additional units of a good could be produced at an increasing opportunity cost,the production possibility frontier would be linear.

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."

Figure 2-13 Figure 2-13 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-13.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 milk?

In a simple circular flow diagram,who supplies factors of production in markets and who buys these factors of production? Who supplies goods and services in markets and who buys these goods and services?

If the production possibilities frontier is ________,then opportunity costs are constant as more of one good is produced.

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point E,what is the opportunity cost of moving to point D?

________ shows that if all resources are fully and efficiently utilized,more of one good can be produced only by producing less of another good.

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. -Refer to Figure 2-2.What is the opportunity cost of one pound of meat?

In the circular flow model,households supply resources such as labor services in the factor market.

Is it possible for a firm to have a comparative advantage in producing something without having an absolute advantage? Why or why not?

Table 2-15 George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 Table 2-15 shows the output per day of two gardeners, George and Jack.They can either devote their time to mowing lawns or cultivating gardens. -Refer to Table 2-15.What is George's opportunity cost of cultivating a garden?

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?

If the opportunity cost of producing more of one good remains the same as more of that good is produced,then the production method is inefficient.

Figure 2-19 -Refer to Figure 2-19.Which two arrows in the diagram depict the following transaction: Barney earns $250 for selling scissors and razors to Floyd's Barber Shop.

A guild is

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

Table 2-6 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 2-6.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.