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

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

Table 2-20 One Wristwatch Rice (per pound) Japan 50 hours 2 hours Thailand 30 hours 1.5 hours Table 2-20 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-20.If the two countries specialize and trade,who should export rice?

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties.If he now produces 35 bow ties and 15 neckties,what is the opportunity cost of producing an additional 15 neckties?

Households

Figure 2-11 Mercedes Benz produces a full line of luxury automobiles, including coupes, sedans, and SUVs, at a variety of manufacturing plants across the globe.Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa, Alabama factory.Figure 2-11 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory. -Refer to Figure 2-11.In response to changing consumer demands,Mercedes-Benz cuts back on the production of SUVs and increases its production of coupes.This strategy is best represented by

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.Suppose Mendonca is currently producing 60 pounds of vegetables per period.How much meat is it also producing,assuming that resources are fully utilized?

Consider a country that produces only two goods: pineapples and tractors.Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors.In this case,its current output combination is inefficient.

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.What is the opportunity cost of producing one gallon of milk in Tahiti?

If a country produces only two goods,then it is not possible to have a comparative advantage in the production of both those goods.

What does the term "increasing marginal opportunity cost" mean? How are increasing marginal opportunity costs represented on a bowed out production possibilities frontier?

Figure 2-14 Figure 2-14 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. -Refer to Figure 2-14.What is the opportunity cost of producing 1 ton of pineapples in Guatemala?

How are efficiency and inefficiency represented on a production possibilities frontier?

If a brewery wants to raise funds to purchase a new fermenting vat,it does so in the

Increasing opportunity cost along a bowed out production possibilities frontier occurs because

Table 2-20 One Wristwatch Rice (per pound) Japan 50 hours 2 hours Thailand 30 hours 1.5 hours Table 2-20 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-20.What is Japan's opportunity cost of producing one pound of rice?

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

a.Draw a production possibilities frontier for a country that produces two goods,beer and pretzels.Assume that resources are equally suited to both tasks. b.Define opportunity costs. c.Use your production possibilities frontier graph to demonstrate the principle of opportunity costs.

Table 2-17 James Lucy Wagons 16 18 Tricycles 32 24 Table 2-17 shows the output per week of two people, James and Lucy.They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-17.What is James's opportunity cost of making a wagon?

Figure 2-14 Figure 2-14 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. -Refer to Figure 2-14.What is the opportunity cost of producing 1 ton of coconuts in Costa Rica?

Table 2-17 James Lucy Wagons 16 18 Tricycles 32 24 Table 2-17 shows the output per week of two people, James and Lucy.They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-17.What is Lucy's opportunity cost of making a tricycle?