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

Table 2-4 Table 2-4 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-4.Finland has a comparative advantage in the production of

Table 2-6 -Refer to Table 2-6. This table shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. a.If each country has a total of 3,600 labor hours to devote to the production of the two goods,draw the production possibilities frontier for each country.Put "Cell Phone" on the horizontal axis and "Lumber" on the vertical axis. Be sure to identify the intercept values on your graphs. b. Suppose each country allocates 55% its labor hours to lumber production and 45% to the production of cell phones.Complete Table 2-7 below to show each country's output of the two products. Table 2-7: 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 Estonia's consumption point "E" and Finland's consumption point,"F." d. Suppose the two countries specialize and trade.Who should produce cell phones and who should produce lumber? Explain your answer. e. Complete Table 2-8 below to show each country's output with specialization. Table 2-8: 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 Estonia and Finland agree to trade so that in exchange for 400 board feet of lumber,the exporter of lumber receives 90 cell phones.Complete Table 2-9 below to show each country's consumption bundle after trade. Table 2-9: Consumption with Trade h.Show the consumption points after trade on each country's production possibilities frontier.Label these points "X" for Estonia and "Y" for Finland. i.Has trade made the two countries better off? Explain your answer.

How are efficiency and inefficiency represented on a production possibilities frontier?

Increasing marginal opportunity cost implies that

The basis for trade is absolute advantage,not comparative advantage.

If Blake can pick more cherries in one hour than Cody,then Blake has a comparative advantage in cherry picking.

A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days.This statement suggests that

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 secure and enforceable property rights system Which of the events listed above could cause a movement from W to V?

In a two-good,two country world,if one country has an absolute advantage in the production of both goods,it can still benefit by trading with the other country.

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 positive relationship exists between safety and gas mileage.

Table 2-4 Table 2-4 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-4.Estonia has a comparative advantage in the production of

Figure 2-1 -Refer to Figure 2-1. ________ is (are)technically efficient.

In economics,the term "free market" refers to a market where no sales tax is imposed on products sold.

The primary purpose of patents and copyrights is to

Economic growth is represented on a production possibilities frontier model by the production possibility frontier

Table 2-3 Table 2-3 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. -Refer to Table 2-3.Which of the following statements is true?

If a country produces only two goods,then it is not possible to have a comparative advantage in the production of both those goods.

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 X ?

Figure 2-7 Figure 2-7 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. -Individuals who have never been the best at doing anything

Comparative advantage means