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

Which of the following is an example of spending on goods and services in the circular flow model?

Define the term "property rights." Explain why the lack of well-defined and enforceable property rights is detrimental to the smooth functioning of a market system.

Figure 2-14 Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-14.Which country has a comparative advantage in the production of snow cones?

The payment received by suppliers of entrepreneurial skills is called interest.

Table 2-10 Fred Barney Pogo Sticks 24 28 Unicycles 8 14 Table 2-10 shows the output per month of two people, Fred and Barney. They can either devote their time to making pogo sticks or making unicycles. -Refer to Table 2-10.What is Fred's opportunity cost of making a unicycle?

For a person to have a comparative advantage in producing a product,he must be able to produce that product at a higher opportunity cost than his competitors.

Figure 2-11 Figure 2-11 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-11.What is the opportunity cost of producing 1 bolt of cotton in Pakistan?

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

Adam Smith's invisible hand refers to

A decrease in the labor force shifts the production possibilities frontier inwards over time.

Figure 2-12 Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-12.What is the opportunity cost of producing one gallon of milk in Tahiti?

It is possible to have an absolute advantage in producing a good or service without having a comparative advantage.

All of the following countries come close to the free market benchmark except

Consider a country that produces only two goods: parrots and iguanas.Suppose it is impossible for this country to increase its production of parrots without producing fewer iguanas.In this case,its current output combination is efficient.

In 18th century Europe,governments gave guilds legal authority to limit production of goods.This authority obstructed the market mechanism because the guild's actions prevented the forces of ________ from coordinating the self-interested decisions of producers and consumers.

Rayburn Reed is a highly talented photographer.He has chosen to specialize in photography because of all of the following except

Table 2-15 George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 Table 2-15 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 2-15.Which of the following statements is true?

Figure 2-17 -Refer to Figure 2-17.One segment of the circular flow diagram in the Figure shows the flow of funds from market F to economic agents G.The funds represent spending on goods and services.What is market F and who are economic agents G?

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from Y to Z

Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. -Refer to Figure 2-8.What is the opportunity cost of 80 dozen orchids?