Exam 2: Economic Models

Use the following to answer questions : -(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Sweden has a comparative advantage in producing:

The basis of the circular-flow diagram is that the money flowing into each sector or market is equal to the money that flows out.

In building models, economists often assume that opportunity costs don't matter.

Use the following to answer questions : Figure: Strawberries and Submarines II -(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Point F:

Use the following to answer questions: Figure: Strawberries and Submarines -(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. Suppose the economy is operating at point G. This implies that:

A production possibility frontier that is a straight line sloping down from left to right suggests that:

Use the following to answer questions : Figure: Consumer and Capital Goods -(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. If the economy is operating at point Y and its relevant production possibility frontier is curve 1:

Use the following to answer questions: Scenario: Linear Production Possibility Frontier Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor. The table shows the number of hours of labor necessary to produce one pair of socks or one shirt. -(Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. If Largetown's labor resource decreases by 40 hours, the opportunity cost of producing shirts:

The financial meltdown of 2008-2009:

Use the following to answer questions: Figure: Tom's Production Possibilities -(Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities. Which point or points represent(s) a combination of coconuts and fish that is efficient in production?

After 2000 the market for mortgage-backed securities grew rapidly because economists claimed they had a model that could predict the risk associated with them.

Economists who are asked to choose between two government policies may disagree because:

Use the following to answer questions : -(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Finland has a comparative advantage in producing:

Use the following to answer questions : Figure: Production Possibilities and Circular-Flow Diagram -(Figure: Production Possibilities and Circular-Flow Diagram) Look at the figure Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram capital that used to flow to firms producing coconuts now flows to firms producing fish. This adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:

Use the following to answer questions: Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all of its resources to produce steel, it can produce 250 tons of steel and no wheat. If country B spends all of its available resources producing wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the production of steel, it can produce 400 tons of steel. -(Scenario: Countries A and B) Look at the scenario Countries A and B. Given this information, the country that has the absolute advantage in wheat is _____, and the country that has the absolute advantage in steel is _____.

Use the following to answer questions : Figure: Guns and Butter -(Figure: Guns and Butter) Look at the figure Guns and Butter. On this figure, points A, B, E, and F:

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. With specialization, _____ brownies and _____ cookies will be made in one day.

Use the following to answer questions: -(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. If an economy is producing at alternative W, the opportunity cost of producing at X is _____ unit(s) of consumer goods per period.

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

Use the following to answer questions : -(Table: Fish and Coconut Production Possibilities) The table Fish and Coconut Production Possibilities shows the maximum amount of fish or coconuts that Tom and Hank can produce when each produces only one of the goods. The table implies that Hank has an absolute advantage in the production of both goods.