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

If a country produces only two goods,it is possible to have a comparative advantage in the production of both those goods.

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

Table 2-11 Table 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-11.What is Ireland's opportunity cost of producing one guitar?

If Tanisha can audit more tax returns in one hour than Libby,then Tanisha has an absolute advantage in auditing tax returns.

Economic decline (negative growth)is represented on a production possibilities frontier model by the production possibility frontier

An increase in the labor force shifts the production possibility frontier inwards over time.

A decrease in population shifts the production possibility frontier outwards over time.

Figure 2-10 Figure 2-10 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-10.What is the opportunity cost of producing one gallon of milk in Tahiti?

What is a circular flow diagram and what does it demonstrate?

Table 2-10 Table 2-10 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 2-10.What is tammi's opportunity cost of bathing a cat?

Which of the following statements is true?

Table 2-7 Table 2-7 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 2-7.Which of the following statements is true?

The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources.

Table 2-6 Table 2-6 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 2-6.Which of the following statements is true?

Table 2-12 -Refer to Table 2-12.This table shows the number of labor hours required to produce a digital cameras and a bushel 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 pound of wheat? f. What is South Korea's opportunity cost of producing one pound of what? g. If each country specializes in the production of the product in which it has a comparative advantage,who should produce digital cameras? h. If each country specializes in the production of the product in which it has a comparative advantage,who should produce wheat?

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 movements: a.from point V to point W b.from point W to point Y c.from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production?

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

Suppose in Belize,the opportunity cost of producing a sailboat is 5 hang gliders.In Honduras,the opportunity cost of producing a sailboat is 8 hang gliders. a. What is the opportunity cost of producing a hang glider for Belize? b. What is the opportunity cost of producing a hang glider for Honduras? c. Which country has a comparative advantage in the production of hang gliders? d. Which country has a comparative advantage in the production of sailboats?

a. Draw a production possibilities frontier for a country that produces two goods,beer and pretzels.Assume that resources are equally suited to both tasks. b. Define opportunity costs. c. Use your production possibilities frontier graph to demonstrate the principle of opportunity costs.

Figure 2-9 Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-9.Which country has a comparative advantage in the production of cotton?