CH 9 Econ

The main role of markets is: reallocating resources to better uses. providing jobs and products. facilitating consumption. preventing waste in choices.

reallocating

To get maximum output, you should allocate each task to the person who: has a cost advantage in completing the task. can do the task with the lowest opportunity cost. can do the task with the smallest amount of input. has an absolute advantage in completing the task.

can do task with the lowest

You are now a functioning RN at the hospital. Some of the tasks between a CNA and an RN overlap, but you should delegate some tasks to CNAs because they have a lower ----- of completing the tasks. Your ----- allows you to take on more complex nursing tasks.

opportunity cost, specialization

An economist mentions that "if we can import apples more cheaply, we can bake a bigger apple pie; this is the beauty of international trade." This economist believes that: trade is disruptive in the long run. trade is about business. the magic of voluntary exchange is to make cheaper goods. trade reallocates tasks so that they're done more efficiently.

trade reallocates tasks so that they're done more efficiently

Specialization will increase output when it is based on: comparative advantage. who can produce the fastest. absolute advantage. who can produce at the least comparative cost.

Comparative adv

You have a comparative advantage if you can complete a task: at a higher opportunity cost than anyone else. using fewer inputs than anyone else. using more inputs than anyone else. at a lower opportunity cost than anyone else.

at a lower

Ikea sells millions of Billy bookcases each year to buyers all around the world. It sells so many of them because the Billy bookcase is so cheap. When you're producing millions of bookcases, you can invest in creating incredibly specialized production lines that are much more efficient. This virtuous cycle arises because of _____. specialized skills the benefits of mass production opportunity costs abundance of natural resources

benefits of mass production

Which of the following benefits could a company gain from using internal markets? Better allocation of its resources and more accurate predictions. Access to more input markets and greater levels of competition. Greater market power and reduced costs of production. Increased profits and reduced competition.

better

"Fair-trade" advocates claim fair trade would yield_____, though at the cost of higher prices in the United States. better working conditions and higher incomes for foreign workers stronger international relationships among trading partners better trading deals and more trade agreements for the United States higher quantities of exported goods from foreign countries

better working conditions and higher income for foreign workers

Which transaction fails to produce gains from trade for both buyers and sellers? Callie turns down an extra shift at work to take care of household chores. Neighbors Jordan and Chelsea are both working parents. They can hire a single babysitter to care for both of their toddlers for 75 percent of what they would collectively have to pay two separate babysitters. Elijah decides that his family should eat more healthy meals, but they are very pressed for time. He decides to subscribe to a service that sends healthy pre-planned meals to his home three times a week. Charlene's job requires her to work on an oil rig, and she must alternate two weeks on the rig and two weeks off. When she is on the rig, she rents out her apartment through Airbnb.

callie turns down an extra shift at work to take care of household chores

On average, U.S. manufacturing workers earn $39 per hour, compared to $3.96 in Mexico. Wages aren't going to be equalized anytime soon, because: countries with higher wages have higher productivity. Businesses are willing to pay American workers 10 times more. higher trade costs do translate into higher wages. globalization may not force U.S. wages down.

countries with higher wages have higher productivity

If Bishan wants to capitalize on comparative advantage in his life, then he should: compare his preferences to those of others and trade with those who like things he does not like. do more of what he has an absolute advantage in and trade for other things. produce either goods or services but not both. do more of what he is relatively good at and then trade for other things.

do more of what he is relatively

According to the cost-benefit principle, you should only export a good if the price you'll get for it overseas is sufficiently _____ your local price as to offset _____. well below; exportâ€related trade costs far above; import-related trade costs far above; exportâ€related trade costs well below; import-related trade costs

far above, related trade cost

When a country allows _____, the domestic price declines to the world price. The quantity demanded by domestic buyers increases, resulting in an increase in consumer surplus. tariffs exports imports quotas

imports

When people focus on their comparative advantage and then trade for other things, they: improve their standard of living or increase their leisure time. have a lower standard of living than if they focused on their absolute advantage. focus their consumption on just a few things. increase the time they spend working and reduce the variety in their consumption.

improve

The emergence of ride sharing apps like Uber have created gains from trade by introducing new sellers into the market for taxi services and decreasing the price of rides. pushing traditional taxi companies and drivers out of the market. introducing new buyers into the market for taxi services and increasing the price of rides. requiring all of their drivers to have a valid driver's license and a clean driving history.

introducing new sellers into the market for taxi services and decreasing the price of rides

Suppose that Verania and Josimar are roommates that need to complete some household chores. Vacuuming and washing dishes need to be done. They know from the last time they did these chores that it takes Verania 2 hours to vacuum and 1 hour to wash dishes. It takes Josimar 3 hours to vacuum and 2 hours to wash dishes. Josimar says it does not matter which task each of them performs because Verania is faster at both tasks. Josimar's reasoning is wrong. Because Josimar has a comparative advantage in washing dishes, he should wash dishes, and Verania should vacuum. is correct. Because Verania is faster at both tasks, there is no benefit in each volunteer specializing in one task or the other. is wrong. Because Verania has a comparative advantage in washing dishes, she should wash dishes, and Josimar should vacuum. is wrong. Because Verania has an absolute advantage in both tasks, she should perform both tasks herself.

is wrong. Because Verania has a comparative advantage in washing dishes, she should wash dishes, and Josimar should vacuum.

Congratulations! You now have completed your nursing degree and passed all exams to become a registered nurse (RN)! You take a job in a large hospital working in the Labor and Delivery Unit. RNs typically specialize in one or two different areas in a hospital and have certified nursing assistants (CNAs) working with them to help with patient care and comfort. CNAs have a general skill set (taking vital signs, bathing, dressing, wound care, etc.) that can be applied to any department in the hospital. On any given day, certain areas of the hospital might be busier than others, requiring CNAs to float from one department to another as needs arise. Suppose it's a slow day in the Labor and Delivery Unit, and your manager has 6 CNAs scheduled but only needs 3. The fact that your manager scheduled 6 CNAs but only 3 are needed is an example of a substitution effect. an absolute advantage. a knowledge problem. a low opportunity cost. What would be the best way to allocate extra CNAs throughout the hospital? Set up an internal market that allows other departments to "bid" on any additional available workers as the need arises throughout the work day. Talk to your colleague in the nursery to see if they need help, and then spend the rest of the day calling other departments to determine if they need additional CNAs. Send all of your CNAs to the department with the fewest CNAs on the schedule that day. Send them to the Emergency Department, because it is always busy there.

knowledge problem Set up an internal market that allows other departments to "bid" on any additional available workers as the need arises throughout the work day.

Over the last several decades, the number of manufacturing jobs have decreased in the United States and have increased in other countries, such as Mexico. The U.S. also exports goods to Mexico. Most exports are agricultural products like corn, soybeans, and dairy, but exports also include intellectual property. This information suggests that Mexico has a ---opportunity cost of manufacturing goods relative to the United States. The United States must have a ----- in producing ---

lower comparative advantage both agricultural products and computer software.

Compared to the general public, economists have different views on international trade such as: "Trade is a threat, and not just opportunity." "Trade causes disruption in the long run." "Trade is about competition, not cooperation." "People trade. Countries don't."

people trade, countries dont

A counterargument for _____ is that sometimes trade limitations actually undermine this. For example, limiting exports of encryption software actually helped foreign competitors develop encryption technology, by reducing the competition from superior U.S. products. protecting national security preventing unfair competition enforcing minimum standards saving jobs

protecting national security

A bike exporter from the United States seeks an opportunity to sell its bikes in Burundi. It plans to ship its bikes to Bujumbura, a city in Burundi, where people use bikes as taxis. However, it will take 124 days to ship the bikes through multiple ports and the bikes will need at least 19 documents and 55 signatures to pass through customs. This example shows you that the government makes it harder for foreign firms to do business in Burundi through: red tape. import quotas. export quotas. tariffs.

red tape

Internal markets, which are markets that managers set up within their organization, are: based on predetermined prices rather than equilibrium prices. allowed to sell only to customers on an approved list of buyers. required to use real money to allocate real resources across firms in an industry. set up to allocate resources of a company more efficiently, often not using real money.

set up

Economists believe that trade increases the size of the pie in the long run. However, they should also pay more attention to the short-run disruption to: preserve the particular pie-making roles in any nation. maintain the flavor of the larger pie. smooth out reassigning people to different pie-making roles. continue increasing the size of the pie.

smooth out reassigning people to different pie-making roles.

Why is there almost no international trade in medical services, and no international trade in houses? People only consider price and out-of-pocket expenses for these products and services. Their opportunity costs from overseas are relatively lower than our domestic prices. Their trade costs are prohibitively expensive, and it is nearly impossible to transport a house. They have low trade costs, and it is virtually impossible to transport a house.

their trade costs are prohibitively expense, and it is nearly impossible to transport a house

By importing shirts from overseas, American consumers enjoy a lower price of shirts. When the government imposes a tariff on imported shirts, it also gains tax revenue. As international trade brings more competition from overseas, how does the tariff affect domestic shirt suppliers in the United States? They are displeased because the tariffs lower the price of shirts and they lose some profits. They are displeased because a tariff increases their cost per shirt sold in the United States. They are pleased because the government limits the imported quantity from foreign suppliers. They are pleased because the higher price means more profits and increased quantities.

they are pleased because the higher price means more profits and increased quantities

Why would a company set up internal markets? To solve the knowledge problem. To prevent the product price from falling. To gain access to resources that were previously unavailable. To solve a problem with product design.

to solve the knowledge problem

Across countries, a study about international trade sought for a relationship between how much a country imports (share of income spent on imports) and the unemployment rate, and found that: imports decrease the unemployment rate. a high unemployment rate causes a country to import. imports increase the unemployment rate. unemployment is not related to imports.

unemployment is not related to imports

There are at least two ways to make cars: building them in Detroit, and growing them in Iowa. Growing cars in Iowa actually means that: we can import corn in exchange for cars. we can ship cars to an Iowa distribution center. we can build new manufacturing facilities in Iowa. we can grow corn and export it overseas, in return for new cars.

we can grow corn and export it oversees, in return for new cars

Imagine that you work for Boeing, building airplanes. Each plane from your production line embodies some of your labor, so every time one of these planes is exported to China, this means that _____. American and Chinese laborers directly compete with each other you are selling some of your labor to China American and Chinese laborers compete in the same national labor market China's exported goods embody the labor of American workers

you are selling some of your labor to china