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

Table 2-5 Table 2-5 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 2-5.What is Fred's opportunity cost of making a pogo stick?

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

Table 2-6 Table 2-6 shows the number of labour hours required to produce a digital camera and a kilogram of wheat in China and South Korea. -Refer to Table 2-6.What is China's opportunity cost of producing one kilo of wheat?

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

Adam Smith's behavioural assumption about humans was that people

In a free market there are significant restrictions on how a good or service can be produced or sold.

Figure 2-4 -Refer to Figure 2-4.If the economy is currently producing at point X,what is the opportunity cost of moving to point Y?

In economics,the term 'free market' refers to a market where products are traded but not sold.

Figure 2-6 Figure 2-6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids. -Refer to Figure 2-6.Suppose Vidalia is currently producing 120 dozen roses per period.How many orchids is it also producing,assuming that resources are fully utilised?

Table 2-10 -Refer to Table 2-10.This table shows the number of labour hours required to produce a digital camera and a kilo of wheat in China and South Korea. a. Which country has an absolute advantage in the production of digital cameras? b. Which country has an absolute advantage in the production of wheat? c. What is China's opportunity cost of producing one digital camera? d. What is South Korea's opportunity cost of producing one digital camera? e. What is China's opportunity cost of producing one kilo of wheat? f. What is South Korea's opportunity cost of producing one kilo of wheat? g. If each country specialises in the production of the product in which it has a comparative advantage,who should produce digital cameras? h. If each country specialises in the production of the product in which it has a comparative advantage,who should produce wheat?

What is meant by the term 'free market'?