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

Figure 2-12 -Refer to Figure 2-12.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?

Which of the following is an examples of spending on factors of production in the circular flow model?

If opportunity costs are ________,the production possibilities frontier would be graphed as a negatively sloped straight line.

Table 2-1 Production Choices for Dina's Diner -Refer to Table 2-1.Dina faces ________ opportunity costs in the production of sliders and hot wings.

In the circular flow model,households demand resources such as labor services in the product market.

Adam Smith,the father of modern economics wrote in his book,An Inquiry into the Nature and Causes of the Wealth of Nations,"It is not from the benevolence of the butcher,the brewer,or the baker,that we expect our dinner but from their regard to their own interest." Explain what he meant by that statement and how such behavior promotes the wealth of a nation.

In a production possibilities frontier model,a point inside the frontier is

Table 2-1 Production Choices for Dina's Diner -Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear

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 patent protection period to 75 years B.a hurricane that destroys a substantial portion of a nation's capital stock C.the implementation of a secure and enforceable property rights system Which of the events listed above could cause a movement from W to Z?

Figure 2-3 -Refer to Figure 2-3.Carlos Vanya grows tomatoes and strawberries on his land.A portion of his land is more suitable for growing tomatoes and the other portion is better suited for strawberry cultivation.Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Figure 2-13 -Refer to Figure 2-13.Which two arrows in the diagram depict the following transaction: Stanley purchases the novel,"Night of Sorrows" for his summer reading pleasure.

Table 2-2 Production choices for Nadia's Neckware -Refer to Table 2-2.Assume Nadia's Neckware only produces ascots and bowties.A combination of 8 ascots and 18 bowties would appear

The circular flow model demonstrates

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 ________ is the result of additional government restrictions on the pollution that results from plastic production.

Table 2-10 -Refer to Table 2-10.This table shows the number of labor hours required to produce a wristwatch and a bushel of rice in Japan and Thailand. a.Which country has an absolute advantage in the production of wristwatches? b.Which country has an absolute advantage in the production of rice? c.What is Japan's opportunity cost of producing one wristwatch? d.What is Thailand's opportunity cost of producing one wristwatch? e.What is Japan's opportunity cost of producing one pound of rice? f.What is Thailand's opportunity cost of producing one pound of rice? g.If each country specializes in the production of the product in which it has a comparative advantage,who should produce wristwatches? h.If each country specializes in the production of the product in which it has a comparative advantage,who should produce rice?

Table 2-12 -Refer to Table 2-12.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 2-13 below to show each country's output of the two products. Table 2-13: 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 2-14 below to show each country's output with specialization. Table 2-14: 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 2-15 below to show each country's consumption bundle after trade. Table 2-15: 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.

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?

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

Table 2-1 Production Choices for Dina's Diner -Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 50 sliders and 50 hot wings would appear

If property rights are not well enforced,all of the following are likely to occur except