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?

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

Table 2-5 Production choices for Nadia's Neckware -Refer to Table 2-5. Assume Nadia's Neckware only produces ascots and bowties. A combination of 16 ascots and 6 bowties would appear

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.

If additional units of a good could be produced at an increasing opportunity cost, the production possibility frontier would be linear.

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 30 years B. an increase of a nation's capital stock C. an improved property rights system Which of the events listed above could cause a movement from V to W?

Table 2-10 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 Barney's opportunity cost of making a pogo stick?

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. general technological advancement C. a decrease in consumer wealth Which of the events listed above could cause a movement from X to V?

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. a decrease in the unemployment rate B. general technological advancement C. an increase in consumer wealth Which of the events listed above could cause a movement from V to X?

In a free market there are virtually no restrictions, or at best few restrictions, on how factors of production can be employed.

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. If Vidalia chooses to produce 40 dozen orchids, how many roses can it produce to maximize production?

Table 2-10 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. Which of the following statements is true?

A successful market economy requires well defined property rights and

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

Table 2-20 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. Japan has a comparative advantage in the production of

Table 2-2 Production choices for Billie's Bedroom Shop -Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 5 pillows and 21 blankets would appear

Table 2-7 -Refer to Table 2-7. The Shellfish Shack produces only shrimp and oysters. The table above shows the maximum possible output combinations of the two types of shellfish using all resources and currently available technology. a. Suppose The Shellfish Shack is currently producing at point E. What is the opportunity cost of producing an additional 11,000 pounds of oysters? b. Suppose The Shellfish Shack is currently producing at point E. What happens to the opportunity cost of producing more and more shrimp? Does it increase, decrease or remain constant? Explain your answer. c. Suppose The Shellfish Shack is currently producing at point B. What happens to the opportunity cost of producing more and more oysters? Does it increase, decrease or remain constant? Explain your answer. d. Suppose The Shellfish Shack is plagued by a disease which destroys oyster beds but not shrimp habitats. What would happen to its PPF?

The opportunity cost of taking an online history class is

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.

Table 2-4 Production Choices for Dina's Diner -Economic growth is represented on a production possibilities frontier model by the production possibility frontier