Exam 2: Choices and Trade-Offs in the Market

In a free market there are virtually no restrictions or, at best, few restrictions on how factors of production can be employed.

Figure 2.2 -Refer to Figure 2.2.Steve Vignetto raises cattle and llamas on his land.His land is equally suitable for raising either animal.The graph in Figure 2-2 that represents his production possibility frontier is:

The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.

Table 2.9 -Refer to Table 2.9.This table shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. a. Which country has an absolute advantage in the production of motorcycles? b. Which country has an absolute advantage in the production of guitars? c. What is Ireland's opportunity cost of producing one motorcycle? d. What is Scotland's opportunity cost of producing one motorcycle? e. What is Ireland's opportunity cost of producing one guitar? f. What is Scotland's opportunity cost of producing one guitar? g. If each country specialises in the production of the product in which it has a comparative advantage, who should produce motorcycles? h. If each country specialises in the production of the product in which it has a comparative advantage, who should produce guitars? __________________________________________________________________________________________________________________________________________________________________________________________

Table 2.1 Production choices for Tomaso's Trattoria -Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.Where would a combination of 24 pizzas and 15 calzones appear?

Table 2.8 Table 2.8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2.8.If the two countries specialise and trade, who should export guitars?

If a country is producing efficiently and is on the production possibility frontier, the country can produce more of one good without producing less of the other good.

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it cannot benefit by trading with the other country.

Table 2.2 Production choices for Billie's Bedroom Shop -Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.A combination of 9 pillows and 21 blankets would appear________.

Which of the following statements is true?

Wages is the resource income earned by those who supply________.

Suppose your expenses for this term are as follows: tuition: $10 000, room and board: $6000, books and other educational supplies: $1000.Further, during the term, you can only work part-time and earn $8000 instead of your full-time salary of $20 000.What is the opportunity cost of going to university this term, assuming that your room and board expenses would be the same even if you did not go to university?

In which market would you purchase a new pair of jeans?

Without an increase in the supplies of factors of production, a nation can achieve economic growth________.

Figure 2.1 -Refer to Figure 2.1.Point A is:

For each surfboard that Australia produces, it gives up the opportunity to make 25 boomerangs.New Zealand can produce 1 surfboard for every 15 boomerangs it produces.Which of the following is true about the comparative advantage between the two countries?

Figure 2.7 Figure 2.7 shows the production possibility frontiers for Pakistan and Indonesia.Each country produces two goods, cotton and cashews. -Refer to Figure 2.7.Which country has a comparative advantage in the production of cashews?

What is economic growth? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation. -Refer to Figure 2.3.Consider the following events: a.an increase in the unemployment rate b.general technological advancement c.a decrease in consumer wealth Which of the events listed above could cause a movement from X to V?

What is true about the slope of a production possibility frontier?