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

What is a circular flow diagram and what does it demonstrate?

Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. -Refer to Figure 2-8.Suppose Vidalia is currently producing 120 dozen roses per period.How many orchids is it also producing, assuming that resources are fully utilized?

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 concept of opportunity costs.

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Figure 2-9 Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-9.What is the opportunity cost of producing 1 pound of cashews in Pakistan?

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other.

What is comparative advantage? What is absolute advantage?

Which of the following is an example of spending on factors of production in the circular flow model?

An inward shift of a nation's production possibilities frontier can occur due to

The payment received by suppliers of entrepreneurial skills is called wages.

Table 2-10 Table 2-10 shows the output per day of two pet groomers, Tammi and Horace. They can either devote their time to grooming dogs or bathing cats. -Refer to Table 2-10.Which of the following statements is true?

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?

Table 2-11 Table 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-11.If the two countries specialize and trade, who should export guitars?

The production possibilities frontier model shows that

Figure 2-5 -Refer to Figure 2-5.If the economy is currently producing at point W, what is the opportunity cost of moving to point X?

Table 2-11 Table 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-11.What is Ireland's opportunity cost of producing one guitar?

Table 2-11 Table 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-11.If the two countries specialize and trade, who should export motorcycles?

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point E, what is the gain in production if the economy moves to point D?

Table 2-9 Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. -Refer to Table 2-9.What is Guatemala's opportunity cost of producing one canoe?

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