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

Table 2-17 James Lucy Wagons 16 18 Tricycles 32 24 Table 2-17 shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles. -Refer to Table 2-17.What is Lucy's opportunity cost of making a tricycle?

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point A,what is the opportunity cost of moving to point B?

Table 2-19 Wilma Betty Statues 12 14 Benches 4 7 Table 2-19 shows the output per month of two people, Wilma and Betty. They can either devote their time to making marble statues or making marble benches. -Refer to Table 2-19.What is Wilma's opportunity cost of making a bench?

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

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.China has a comparative advantage in the production of

Table 2-21 Digital Camera Wheat (bushel) China 100 hours 5 hours South Korea 90 hours 3 hours -Refer to Table 2-21.This table shows the number of labor hours required to produce a digital camera and a bushel of wheat in China and South Korea. a.Which country has an absolute advantage in the production of digital cameras? b.Which country has an absolute advantage in the production of wheat? c.What is China's opportunity cost of producing one digital camera? d.What is South Korea's opportunity cost of producing one digital camera? e.What is China's opportunity cost of producing one bushel of wheat? f.What is South Korea's opportunity cost of producing one pound of wheat? g.If each country specializes in the production of the product in which it has a comparative advantage,who should produce digital cameras? h.If each country specializes in the production of the product in which it has a comparative advantage,who should produce wheat?

Figure 2-7 Tesla opened its Gigafactory near Sparks, Nevada to produce lithium-ion batteries for both its automobiles and its Powerwall energy storage products. Figure 2-7 shows changes to its production possibilities frontier at the Gigafactory in response to new developments and different strategic production decisions. -Refer to Figure 2-7.Suppose worker productivity increases so that the total number of batteries produced increases as Tesla adds more machinery and workers,and changes the layout of the factory.This is best represented by the

Figure 2-18 -Refer to Figure 2-18.Which two arrows in the diagram depict the following transaction: Dorian Gray hires "Wild Oscar," a professional portrait artist,to paint his picture.

Table 2-20 One Wristwatch Rice (per pound) Tapan 50 hours 2 hours Thailand 30 hours 1.5 hours Table 2-20 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-20.What is Thailand's opportunity cost of producing one wristwatch?

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point E,what is the gain in production if the economy moves to point D?

On a diagram of a production possibilities frontier,opportunity cost is represented by the production possibilities frontier shifting outward.

Table 2-20 One Wristwatch Rice (per pound) Tapan 50 hours 2 hours Thailand 30 hours 1.5 hours Table 2-20 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-20.What is Japan's opportunity cost of producing one wristwatch?

For a person to have a comparative advantage in producing a product,she must be able to produce that product at a lower opportunity cost than her competitors.

Figure 2-13 Figure 2-13 shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. -Refer to Figure 2-13.If the two countries have the same amount of resources and the same technological knowledge,which country has an absolute advantage in the production of both pineapples and coconuts?

What causes a production possibilities frontier to shift outward?

________ marginal opportunity cost implies that the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

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.If the two countries specialize and trade,who should export guitars?

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point E,what is the opportunity cost of moving to point B?

Economic decline (negative growth)is represented on a production possibilities frontier model by the production possibility frontier

Households ________ final goods and services in the ________ market.