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

Figure 2-11 -Refer to Figure 2-11.One segment of the circular flow diagram in the figure shows the flow of wages and salaries from market K to economic agents M.What is market K and who are economic agents M?

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.

In 18th century Europe, governments gave guilds legal authority to limit production of goods.How did this authority either obstruct or improve the market mechanism?

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?

Figure 2-12 -Refer to Figure 2-12.One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A.What is market C and who are economic agents A?

Table 2-6 Table 2-6 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 2-6.What is Serena's opportunity cost of making a bracelet?

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.Consider the following events: A.a reduction in the patent protection period to no more than 2 years B.a war that destroys a substantial portion of a nation's capital stock C.the lack of a secure and enforceable property rights system Which of the events listed above could cause a movement from W to V?

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.What is Tammi's opportunity cost of bathing a cat?

For a person to have a comparative advantage in producing a product, she must be able to produce that product at a lower opportunity cost than her competitors.

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

Figure 2-10 Figure 2-10 shows the production possibilities frontiers for Tahiti and Bora Bora.Each country produces two goods, milk and honey. -Refer to Figure 2-10.What is the opportunity cost of producing one gallon of honey in Tahiti?

Any output combination along a production possibilities frontier is associated with fully utilized resources.

Figure 2-11 -Refer to Figure 2-11.One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J.What is market K and who are economic agents J?

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

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 basis for trade is comparative advantage, not absolute advantage.

Table 2-7 Table 2-7 shows the output per month of two people, Fred and Barney.They can either devote their time to making pogo sticks or making unicycles. -Refer to Table 2-7.Which of the following statements is true?

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 ________ could occur because of an influx of immigrant labor.

Figure 2-10 Figure 2-10 shows the production possibilities frontiers for Tahiti and Bora Bora.Each country produces two goods, milk and honey. -Refer to Figure 2-10.Which country has a comparative advantage in the production of honey?

Tesla Motors manufacturers its cars at a plant in Fremont, California.At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China.In deciding to open the Fremont plant, Tesla