Exam 2: Choices and Trade Offs in the Market

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

The production possibility frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation. -Refer to Figure 2.3. Consider the following events: A.an increase in the patent protection period to 30 years B.an increase of a nation's capital stock C.an improved property rights system Which of the events listed above could cause a movement from V to W?

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?

As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men.

Consider the following items: A.the album '21' by Adele B.a Dutch horticulturalist's new method for cultivating hybrid tulips C.Rolls Royce's 'Spirit of Ecstasy' hood ornament design D.the sale of Tumi luggage at a Myers department store Which of the items listed is an example of intellectual property?

a.Draw a production possibility 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 possibility frontier graph to demonstrate the principle of opportunity costs. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Figure 2.2 -Refer to Figure 2.2. Steve Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2.2 represents his production possibility frontier?

In a production possibility frontier model, a point ________ the frontier is productively inefficient.

Table 2.8 Table 2.8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2.8. Does either Ireland or Scotland have an absolute advantage and if so, in what product?

Table 2.10 -Refer to Table 2.10. This table shows the number of labour hours required to produce a digital cameras and a kilogram 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 1 kilogram of wheat? f.What is South Korea's opportunity cost of producing 1 kilogram of wheat? g.If each country specialises in the production of the product in which it has a comparative advantage, who should produce digital cameras? h.If each country specialises in the production of the product in which it has a comparative advantage, who should produce wheat? _____________________________________________________________________________________________ _____________________________________________________________________________________________

An inward shift of a nation's production possibility frontier represents:

Stella can produce either a combination of 60 silk tulips and 85 silk leaves or a combination of 70 silk tulips and 55 silk leaves. If she now produces 60 silk tulips and 85 silk leaves, what is the opportunity cost of producing an additional 10 silk tulips?

Figure 2.6 Figure 2.6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids. -Refer to Figure 2.6. What is the opportunity cost of 80 dozen orchids?

Specialising in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except:

Which of the following is a factor of production?

Table 2.9 -Refer to Table 2.9. This table shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. a.Which country has an absolute advantage in the production of motorcycles? b.Which country has an absolute advantage in the production of guitars? c.What is Ireland's opportunity cost of producing one motorcycle? d.What is Scotland's opportunity cost of producing one motorcycle? e.What is Ireland's opportunity cost of producing one guitar? f.What is Scotland's opportunity cost of producing one guitar? g.If each country specialises in the production of the product in which it has a comparative advantage, who should produce motorcycles? h.If each country specialises in the production of the product in which it has a comparative advantage, who should produce guitars? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Table 2.1 Production choices for Tomaso's Trattoria -Refer to Table 2.1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 12 pizzas and 35 calzones would appear:

Suppose there is no unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?

Table 2.8 Table 2.8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2.8. What is Ireland's opportunity cost of producing one motorcycle?