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

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.

________ behavioral assumption about humans was that people usually act in a rational,self-interested way.

Any output combination inside a production possibilities frontier is associated with unused or underutilized resources.

Table 2-9 Table 2-9 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-9.What is Japan's opportunity cost of producing one wristwatch?

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from ________ is the result of advancements in plastic production technology.

Which of the following would shift a nation's production possibilities frontier inward?

Table 2-9 Table 2-9 shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. -Refer to Table 2-9.Does either Japan or Thailand have an absolute advantage and if so,in what product?

Table 2-5 Table 2-5 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-5.Does either Estonia or Finland have an absolute advantage and if so,in what product?

________ a nation's production possibilities frontier represents economic growth.

Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a combination of 30 bird houses and 15 wind chimes.If he now produces 30 bird houses and 15 wind chimes,what is the opportunity cost of producing an additional 10 wind chimes?

Which of the following is an example of spending on factors of production in the circular flow model?

Suppose your expenses for this term are as follows: tuition: $5,000,room and board: $3,000,books and other educational supplies: $500.Further,during the term,you can only work part-time and earn $4,000 instead of your full-time salary of $10,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?

Table 2-5 Table 2-5 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-5.What is Finland's opportunity cost of producing one board foot of lumber?

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.

Table 2-6 Table 2-6 shows the output per week of two people,James and Lucy.They can either devote their time to making wagons or making tricycles. -Refer to Table 2-6.What is James's opportunity cost of making a tricycle?

Increasing opportunity cost along a bowed-out production possibilities frontier occurs because

If the best lawyer in town is also the best at operating a word processor,then according to economic reasoning,this person should

Figure 2-8 Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala.Each country produces two goods,pineapples and coconuts. -Refer to Figure 2-8.If the two countries have the same amount of resources and the same technological knowledge,which country has an absolute advantage in the production of both pineapples and coconuts?

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

Table 2-1 Production Choices for Dina's Diner -Refer to Table 2-1.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 25 hot wings would appear