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

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

Tesla Motors manufactures 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

a.Draw a production possibilities frontier for a country that produces two goods,wine and cheese.Assume that resources are not equally suited to both tasks. b.Define opportunity costs. c.Use your production possibilities frontier graph to demonstrate the concept of opportunity costs.

Table 2-11 One Digital Camera Wheat (per pound) China 100 hours 4 hours South Korea 60 hours 3 hours Table 2-11 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 2-11.What is China's opportunity cost of producing one pound of wheat?

Table 2-1 Production choices for Tomaso's Trattoria Choice Quantity of Pizzas Produced Quantity of Calzones Produced A 48 0 B 36 15 C 24 30 D 12 45 E 0 60 -Refer to Table 2-1.Assume that Tomaso's Trattoria only produces pizzas and calzones.Tomaso faces ________ opportunity costs in the production of pizzas and calzones.

Table 2-1 Production choices for Tomaso's Trattoria Choice Quantity of Pizzas Produced Quantity of Calzones Produced A 48 0 B 36 15 C 24 30 D 12 45 E 0 60 -Refer to Table 2-1.Assume that Tomaso's Trattoria only produces pizzas and calzones.A combination of 24 pizzas and 15 calzones would appear

It is not possible to have a comparative advantage in producing a good or service without having an absolute advantage.

________ behavioral assumption about humans was that people usually act in a rational,self-interested way.

Figure 2-10 -Refer to Figure 2-10.If the economy is currently producing at point E,what is the opportunity cost of moving to point B?

An increase in population shifts the production possibilities frontier inwards over time.

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.an increase in the unemployment rate B.a decrease in a nation's money supply C.a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Y to W?

Table 2-14 One Motorcycle One Guitar Treland 20 hours 4 hours Scotland 8 hours 2 hours Table 2-14 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-14.Ireland has a comparative advantage in the production of

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.

An example of a factor of production is

Figure 2-5 -Refer to Figure 2-5.If the economy is currently producing at point Y,what is the opportunity cost of moving to point W?

Figure 2-1 -Refer to Figure 2-1.________ is (are)unattainable with current resources.

On a diagram of a production possibilities frontier,economic decline (negative growth)is represented by the production possibilities frontier shifting inward.

"An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by

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 2-10 -Refer to Figure 2-10.If the economy is currently producing at point E,what is the gain in production if the economy moves to point D?