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

Identify whether each of the following transactions will take place in the factor market or in the product market.: a. Graciela buys a Tesla Motors Model X. b. Lashan works 60 hours a week at a law firm. c. Tito sells his family's farmland to a housing developer. d. Tesla Motors increases employment at its Fremont, California plant.

In a free market there are virtually no restrictions, or at best few restrictions, on how a good or service can be produced or sold.

The opportunity cost of going to an outdoor music festival is

Which of the following is a factor of production?

Table 2-17 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. Which of the following statements is true?

In 18th century Europe, governments gave guilds legal authority to limit production of goods. Did this authority obstruct or improve the market mechanism and how?

An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, was written by

Table 2-4 Production Choices for Dina's Diner -According to the production possibility model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except

Which of the following statements is true?

In a production possibilities frontier model, a point ________ the frontier is productively inefficient.

Tesla Motors manufacturers its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla

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

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

Table 2-11 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. What is South Korea's opportunity cost of producing one digital camera?

Figure 2-19 -Refer to Figure 2-19. Which two arrows in the diagram depict the following transaction: Lizzie Haxem hires "The Paint Pros," a professional painting company, to paint her home.

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. 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 ?

Figure 2-13 Figure 2-13 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-13. Which country has a comparative advantage in the production of honey?

Figure 2-7 Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. -Refer to Figure 2-7. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the

Any output combination inside a production possibility frontier is associated with unused or underutilized resources.

Table 2-12 Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. -Refer to Table 2-12. What is Guatemala's opportunity cost of producing one sailboat?