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

Define the term "property rights." Explain why the lack of well defined and enforceable property rights is detrimental to the smooth functioning of a market system.

Which of the following are represented by the same flow in the circular flow model?

To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers

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

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 canoe?

Table 2-16 Table 2-16 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should

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. Suppose Vidalia is currently producing 120 dozen roses per period. How many orchids is it also producing, assuming that resources are fully utilized?

Table 2-8 -Refer to Table 2-8. 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 pounds 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.

Figure 2-5 -Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

The principle of opportunity cost is that

Figure 2-15 Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-15. 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 popsicles?

Table 2-13 Table 2-13 shows the output per day of two pet groomers, Tammi and Horace. They can either devote their time to grooming dogs or bathing cats. -Refer to Table 2-13. Which of the following statements is true?

Table 2-15 Table 2-15 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. -Refer to Table 2-15. Which of the following statements is true?

What causes a production possibilities frontier to shift inward?

Figure 2-11 Mercedes Benz produces a full line of luxury automobiles, including coupes, sedans, and SUVs, at a variety of manufacturing plants across the globe. Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa, Alabama factory. Figure 2-11 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory. -An increase in the labor force shifts the production possibility frontier inwards over time.

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking.

Which of the following statements about an entrepreneur is true?

Which of the following would shift a nation's production possibilities frontier outward?

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

Table 2-9 Table 2-9 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-9. Which of the following statements is true?