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

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 decrease in the unemployment rate B.general technological advancement C.an increase in consumer wealth Which of the events listed above could cause a movement from V to W ?

In a report made to the U.S.Congress in 2001,the National Academy of Sciences cautioned that if fuel economy encourages the production of smaller and lighter cars,"Some additional traffic fatalities would be expected." This statement suggests that

Figure 2-7 Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-7.Which country has a comparative advantage in the production of cashews?

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

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

Table 2-5 -Refer to Table 2-5.This table shows the number of labor hours required to produce a digital cameras and a bushel 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 one pound of wheat? f.What is South Korea's opportunity cost of producing one pound of what? g.If each country specializes in the production of the product in which it has a comparative advantage,who should produce digital cameras? h.If each country specializes in the production of the product in which it has a comparative advantage,who should produce wheat?

If additional units of a good could be produced at a constant opportunity cost,the production possibility frontier would be bowed outward (concave).

The production possibilities frontier model shows that

A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

Table 2-4 Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2-4.If the two countries specialize and trade,who should export digital cameras?

Table 2-4 Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2-4.If the two countries specialize and trade,who should export wheat?

Figure 2-11 -Refer to Figure 2-11.Which two arrows in the diagram depict the following transaction: Dorian Gray hires "Wild Oscar",a professional portrait artist,to paint his picture.

Figure 2-8 -Refer to Figure 2-8.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?

Specializing 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

Figure 2-11 -Refer to Figure 2-11.Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

Figure 2-7 Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-7.What is the opportunity cost of producing 1 bolt of cotton in Indonesia?

If the best surgeon in town is also the best at cleaning swimming pools,then according to economic reasoning,this person should

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.

Table 2-5 -Refer to Table 2-5.This table shows the number of labor hours required to produce a digital camera and a bushel of wheat in China and South Korea. a.If each country has a total of 9,000 labor hours to devote to the production of the two goods,draw the production possibilities frontier for each country.Put "Digital Camera" on the horizontal axis and "Wheat" on the vertical axis.Be sure to identify the intercept values on your graphs. b.Suppose each country allocates 60% its labor hours to wheat production and 40% to the production of digital cameras.Complete Table 2-6 below to show each country's output of the two products. Table 2-6: Production and Consumption with no Trade c.If the two countries do not trade and consume whatever they produce,identify the current production and consumption point for each country on their respective production possibilities frontiers.Label China's consumption point "C" and South Korea's consumption point,"K." d.Suppose the two countries specialize and trade.Who should produce digital cameras and who should produce wheat? Explain your answer. e.Complete Table 2-7 below to show each country's output with specialization. Table 2-7: Output with Specialization f.Did specialization increase the combined output for the two countries without any increase in resources? If so,by how much? g.Suppose China and South Korea agree to trade so that in exchange for 1,200 bushels of wheat,the exporter of wheat receives 48 digital cameras.Complete Table 2-8 below to show each country's consumption bundle after trade. Table 2-8: Consumption with Trade h.Show the consumption points after trade on each country's production possibilities frontier.Label these points "B" for China and "J" for South Korea. i.Has trade made the two countries better off? Explain your answer. countries to consume outside their PPFs.

If a commercial dairy farm wants to raise funds to purchase feeding troughs,it does so in the