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

How do firms and households interact in markets?

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 Pakistan?

How does Adam Smith's idea of the "invisible hand" apply to the various parts,made by many different manufacturers in many different countries,that are used by Apple to produce an iPad?

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.In response to changing consumer demands,GM has cut back on the production of hybrids and increased its production of gasoline-powered vehicles.This strategy is best represented by the

Figure 2-1 -Refer to Figure 2-1.Point B is

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

Table 2-1 Production choices for Tomaso's Trattoria -Refer to Table 2-1.Assume Tomaso's Trattoria only produces pizzas and calzones.Tomaso faces ________ opportunity costs in the production of pizzas and calzones.

Adam Smith's invisible hand refers to

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

To increase gas mileage,automobile manufacturers make cars small and light.Large cars absorb more of the impact of an accident than small cars but yield lower gas mileage.These facts suggest that a negative relationship exists between safety and gas mileage.

Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?

For each bottle of wine that Italy produces,it gives up the opportunity to make 10 pounds of cheese.France can produce 1 bottle of wine for every 25 pounds of cheese it produces.Which of the following is true about the comparative advantage between the two countries?