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

A stand of redwood trees is not an example of a factor of production but the harvested and processed redwood is a factor of production.

The basis for trade is comparative advantage,not absolute advantage.

Comparative advantage means

Adam Smith,the father of modern economics wrote in his book,An Inquiry into the Nature and Causes of the Wealth of Nations,"It is not from the benevolence of the butcher,the brewer,or the baker,that we expect our dinner but from their regard to their own interest." Explain what he meant by that statement and how such behavior promotes the wealth of a nation.

One Motorcycle One Guitar Ireland 20 hours 4 hours Scotland 8 hours 2 hours Table 2-14 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-14.What is Ireland's opportunity cost of producing one guitar?

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

Entrepreneurs bring together the factors of production to produce goods and services.

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 reduction in the patent protection period to no more than 2 years B.a war that destroys a substantial portion of a nation's capital stock C.the lack of secure and enforceable property rights system Which of the events listed above could cause a movement from W to V?

If the opportunity cost of producing more of one good increases as more of that good is produced,then the production method is inefficient.

Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora.Each country produces two goods,milk and honey. -Refer to Figure 2-12.What is the opportunity cost of producing one gallon of honey in Bora Bora?

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point C,what is the opportunity cost of moving to point B?

Households ________ final goods and services in the ________ market.

One Digital Camera Wheat (per pound) China 100 hours 4 hours South Korea 60 hours 3 hours Table 2-11 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2-11.If the two countries specialize and trade,who should export digital cameras?

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?

Tesla Motors manufacturers its cars at a plant in Fremont,California.At this plant,Tesla is able to take advantage of the high level of technical training possessed by its American workers,but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico,India,or China.In deciding to open the Fremont plant,Tesla

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.Which country has a comparative advantage in the production of cotton?

Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora.Each country produces two goods,milk and honey. -Refer to Figure 2-12.Which country has a comparative advantage in the production of milk?

Consider a country that produces only two goods: parrots and iguanas.Suppose it is impossible for this country to increase its production of parrots without producing fewer iguanas.In this case,its current output combination is efficient.

All of the following are examples of spending on goods and services in the circular flow model except

Consider a country that produces only two goods: pineapples and tractors.Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors.In this case,its current output combination is inefficient.