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

Consider a country that produces only two goods: pineapples and tractors.Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors.In this case, its current output combination is inefficient.

If opportunity costs are constant, the production possibilities frontier would be graphed as

The idea underlying Adam Smith's "invisible hand" is that people tend to behave in ways that go unnoticed in society.

A successful market economy requires well-defined property rights and

Figure 2.13 Figure 2.13 shows the production possibilities frontiers for Pakistan and Indonesia.Each country produces two goods, cotton and cashews. Alt text for Figure 2.13: In figure 2.13, 2 graphs, show the production possibilities frontiers for Pakistan and Indonesia. Long description for Figure 2.13: The graph on the left represents Pakistan.The x-axis is labelled, cotton in bolts, and the amount 240 marked.The y-axis is labelled, cashews in pounds, and the amount 150 is marked .A slanted line is drawn from point 150 on the y-axis to point 240 on the x-axis.The graph on the right represents Indonesia.The x-axis is labelled, cotton, in bolts, and the amount 320 is marked.The y-axis is labelled, cashews, in pounds, and the amount 120 marked.A slanted line is drawn from point 120 on the y-axis to point 320 on the x-axis. -Refer to Figure 2.13.What is the opportunity cost of producing 1 pound of cashews in Pakistan?

What is a production possibilities frontier? What do points along the frontier represent? What do points inside and outside the frontier represent?

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

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

Izzy Amador is a highly talented tattoo artist.An economist would argue she has chosen to specialize in tattoo art for all of the following reasons, except

Table 2.3 Production Choices for Dina's Diner -Refer to Table 2.3.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 50 hot wings would appear

Figure 2.12 Tesla motors currently has three different models available in Canada; the Model S and the Model 3 (both coupes)and the Model X (an SUV).Figure 2.12 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Alt text for Figure 2.12: In figure 2.12, 3 graphs, A, B and C show changes to Tesla motors' production possibilities frontier. Long description for Figure 2.12: Graph A: The x-axis is labelled, S U Vs, and the y-axis is labelled, coupes.2 convex curves begin from the same point near the top of the y-axis.The curves diverge.The first curve ends a little more than half-way along the x-axis.The point E is plotted a little more than half-way along the curve.The second curve ends further along the x-axis, near the end of the axis.The point F is plotted a little more than half-way along the curve.Graph B: The x-axis is labelled, S U Vs, and the y-axis is labelled, coupes.2 convex curves are shown.The first curve begins approximately 3 fifths of the way up the y-axis and finishes a little more than half way along the x-axis.Point G is plotted a little more than half-way along the curve.The second curve begins near the end of the y-axis, and ends close to the end of the x-axis.Point J is plotted is little more than 1 third of the way along the curve, and point H is plotted 3 quarters of the way along the curve. -Refer to Figure 2.12. Suppose Tesla has to shut down a portion of its facility as it works on remodelling the facility to merge two of its separate assembly lines in preparation for the production of a new model called a "minibus".The production decision to shut down temporarily will result in a

The income earned by those who supply labour services is called

Table 2.4 -Refer to Table 2.4.The Nut House produces only cashews and almonds.The table above shows the maximum possible output combinations of the two nuts using all resources and currently available technology. a. Graph The Nut House's production possibilities frontier.Put almonds on the horizontal axis and cashews on the vertical axis.Be sure to identify the output combination points on your diagram. b. Suppose The Nut House is currently producing at point C.What is the opportunity cost of producing an additional 12,000 kilograms of almonds? c. Suppose The Nut House is currently producing at point C.What happens to the opportunity cost of producing more and more almonds? Does it increase, decrease, or remain constant? Explain your answer. d. Suppose The Nut House is currently producing at point F.What happens to the opportunity cost of producing more and more cashews? Does it increase, decrease, or remain constant? Explain your answer. e. Suppose The Nut House is plagued by a variety of white root-rot disease, which destroys cashew trees but not almond trees.Show in a graph what happens to its PPF.

Which of the following statements about an entrepreneur is false?

Governments do not face trade-offs in providing programs, only individuals do.

Figure 2.4 Figure 2.4 shows various points on three different production possibilities frontiers for a nation. Alt text for Figure 2.4: In figure 2.4, a graph illustrates 3 different production possibilities. Long description for Figure 2.4: The x-axis is labelled, plastic products, and the y-axis is labelled, food products.3 convex curves are shown, with points V, W, X, Y, and Z plotted.The first curve begins just past the half-way point on the y-axis, and ends just past the half-way point on the x-axis.Points W and X are plotted along the curve, with point W approximately 1 third of the way from the start of the curve, and point X more than 2 thirds of the way along the curve.The second curve begins almost 3 quarters of the way up the y-axis and ends just past the termination of the first curve on the x-axis.Point Y is plotted on the second curve, approximately 2 thirds of the way along the curve.The third curve begins at the same point as the second curve, and ends approximately 3 quarters of the way along the x-axis.Point Z is plotted on the third curve, a little less than half-way along the curve.Point V is plotted between the first curve and the origin. -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 ?

The attainable production points on a production possibility curve are

Table 2.3 Production Choices for Dina's Diner -Refer to Table 2.3.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear

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.

The principle of opportunity cost is that