Exam 2: Model Building and Gains From Trade

A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier (PPF) would show an:

When one producer has a comparative advantage in production, she:

Suppose that, on a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with blanks where you can calculate the opportunity cost. At what terms of trade (relative price ratio) could they specialize and trade with one another so that both have more trees planted and mulch spread than they could accomplish on their own? Trees Planted Opportunity Cost of 1 Tree Amount of Mulch spread (in cubic yards) Opportunity Cost of Spreadling 1 Cubic Yard of Mulch Zuckerberg 20 30 Gates 15 30

Which statement best describes the opportunity cost evident in the production possibilities frontier (PPF) for the accompanying figure?

Draw a production possibilities frontier (PPF) that shows a pizza shop's production trade-offs between producing pizzas and stromboli. Suppose the pizza shop upgrades to a larger, more-automated oven. On the same graph, show how the PPF changes. (The oven is used to bake both pizzas and stromboli.)

Suppose a great plague wipes out half of the society's population. Which of the following graphs best depicts how this would affect the PPF?

The process of using current resources to create or buy new capital is called:

The production possibilities frontier (PPF) shows:

To determine which of two producers has a comparative advantage, you would need to know their:

What assumptions do economists make when developing a production possibilities frontier (PPF)?

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the questions. -What is Gibbs's opportunity cost of making a wooden boat?

You are planning to add new mulch to all the landscaping beds around your house. You have determined the quantity of mulch you will need and have identified these two options for getting the mulch to your house: 1. You can have all the mulch delivered to your yard in one dump truck for $450. 2. You can make four trips to the garden center with your pickup truck and haul it yourself. It will cost you $75 per load for the mulch, plus $25 in fuel and truck wear per load. You estimate it will take about five hours to haul and unload all four loads. What is the full cost of each method? Which method is cheaper? How is opportunity cost relevant?

A model without any simplifying assumptions:

When the opportunity cost of producing a good rises as you produce more of it, you experience:

The ability of one producer to produce a good at a lower opportunity cost than another producer is called:

Economic growth is represented on a production possibilities frontier (PPF) by the PPF:

Goods that are produced now so that they can be used to produce other goods in the future are called:

The process of examining a change in one variable in a model while assuming that all the other variables remain constant is called:

Which statement best describes absolute advantage?

What does it mean when society is operating inside the production possibilities frontier (PPF)?