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

The production possibilities frontier model assumes which of the following?

The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.

Which of the following statements about a simple circular flow model is false?

Stricter laws and regulations to protect intellectual property rights

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.What is South Korea's opportunity cost of producing one pound of wheat?

Suppose in Belize,the opportunity cost of producing a sailboat is 5 hang gliders.In Honduras,the opportunity cost of producing a sailboat is 8 hang gliders. a.What is the opportunity cost of producing a hang glider for Belize? b.What is the opportunity cost of producing a hang glider for Honduras? c.Which country has a comparative advantage in the production of hang gliders? d.Which country has a comparative advantage in the production of sailboats?

If Sanjaya can shuck more oysters in one hour than Tatiana,then Sanjaya has a comparative advantage in shucking oysters.

If opportunity costs are constant,the production possibilities frontier would be graphed as

Figure 2-6 General Motors recently approved for production the Cadillac Converj, an electric car based on its Chevy Volt. The Converj will feature a "Generation 1.5 Voltec" powertrain, with a hybrid engine that runs on a combination of electricity and gasoline. Assume GM chooses to produce both hybrid-engine vehicles and gasoline-engine vehicles for its Cadillac brand. Figure 2-6 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. -Refer to Figure 2-6.Assume a technological advancement greatly reduces the cost to produce hybrid-engine vehicles.This is best represented by the

Which of the following statements is true?

A successful market economy requires

The slope of a production possibilities frontier

What shape does a production possibilities frontier take if it displays increasing opportunity costs? What shape does a production possibilities frontier take if it displays constant opportunity costs? Which shape is most common in production situations?

An outward shift of a nation's production possibilities frontier represents

In a free market there are virtually no restrictions,or at best few restrictions on how factors of production can be employed.

Increasing opportunity cost is represented by a ________ production possibilities frontier.

In the circular flow model,producers

Table 2-2 -Refer to Table 2-2.The Fruit Farm produces only apples and pears.The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology. a.Graph The Fruit Farm's production possibilities frontier.Put apples on the horizontal axis and pears on the vertical axis.Be sure to identify the output combination points on your diagram. b.Suppose The Fruit Farm is currently producing at point D.What is the opportunity cost of producing an additional 8,000 pounds of pears? c.Suppose The Fruit Farm is currently producing at point D.What happens to the opportunity cost of producing more and more pears? Does it increase,decrease or remain constant? Explain your answer. d.Suppose The Fruit Farm is currently producing at point G.What happens to the opportunity cost of producing more and more apples? Does it increase,decrease or remain constant? Explain your answer. e.Suppose The Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pears.Show in a graph what happens to its PPF.

The points outside the production possibilities frontier are

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