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

Suppose in the United States,the opportunity cost of producing a motor engine is 4 auto bodies.In Canada,the opportunity cost of producing a motor engine is 2 auto bodies. a.What is the opportunity cost of producing an auto body for the United States? b.What is the opportunity cost of producing an auto body for Canada? c.Which country has a comparative advantage in the production of auto bodies? d.Which country has a comparative advantage in the production of motor engines?

Which of the following statements about an entrepreneur is true?

Table 2-6 Possible Output Combinations Apples (thousands of pounds) Pears (thousands of pounds) A 70 0 B 60 20 C 50 36 D 40 48 E 30 56 F 20 60 G 10 63 H 0 65 -Refer to Table 2-6.The Fruit Farm produces only apples and pears.The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology. a.Graph The Fruit Farm's production possibilities frontier.Put apples on the horizontal axis and pears on the vertical axis.Be sure to identify the output combination points on your diagram. b.Suppose The Fruit Farm is currently producing at point D.What is the opportunity cost of producing an additional 8,000 pounds of pears? c.Suppose The Fruit Farm is currently producing at point D.What happens to the opportunity cost of producing more and more pears? Does it increase,decrease,or remain constant? Explain your answer. d.Suppose The Fruit Farm is currently producing at point G.What happens to the opportunity cost of producing more and more apples? Does it increase,decrease,or remain constant? Explain your answer. e.Suppose The Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pear trees.Show in a graph what happens to its PPF.

Should countries specialize in producing goods and services based on having a comparative advantage or an absolute advantage? Why?

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

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

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.a decrease in the unemployment rate B.an increase in a nation's money supply C.an influx of immigrant workers Which of the events listed above could cause a movement from X to Z?

Table 2-3 Production Choices for Dina's Diner Choice Quantity of Sliders Produced Quantity of Hot Wings Produced A 160 0 B 120 50 C 80 100 D 40 150 E 0 200 -Refer to Table 2-3.Assume Dina's Diner only produces sliders and hot wings.A combination of 120 sliders and 100 hot wings would appear

Consider the following items: a.the album "Wilder Mind" by Mumford & Sons B.a Dutch horticulturalist's new method for cultivating hybrid tulips C.Rolls Royce's "Spirit of Ecstasy" hood ornament design D.the sale of Tumi luggage at a Macy's department store Which of the items listed is an example of intellectual property?

The production possibilities frontier model assumes all of the following except

Figure 2-11 shows the production possibilities frontiers for Pakistan and Indonesia.Each country produces two goods,cotton and cashews. -Refer to Figure 2-11.What is the opportunity cost of producing 1 pound of cashews in Indonesia?

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

Figure 2-15 -Refer to Figure 2-15.In the circular flow diagram,economic agents M represent

Tammi Horace Dogs Groomed 20 12 Cats Bathed 10 8 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?

Figure 2-16 -Refer to Figure 2-16.In the circular flow diagram,who are economic agents A and who are economic agents B?

One Wristwatch Rice (per pound) Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 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?

Published in 1776,________ was written by Adam Smith.

Figure 2-18 -Refer to Figure 2-18.Which two arrows in the diagram depict the following transaction: Myrna earns $450 for working at HempHill's Drug Store.

If property rights are not well enforced,all of the following are likely to occur except

Table 2-3 Production Choices for Dina's Diner Choice Quantity of Sliders Produced Quantity of Hot Wings Produced A 160 0 B 120 50 C 80 100 D 40 150 E 0 200 -Refer to Table 2-3.Assume Dina's Diner only produces sliders and hot wings.A combination of 80 sliders and 100 hot wings would appear