Chapter 2 - Hailey

(Table: Comparative Advantage I) Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of herring for Finland is _____ box(es) of cell phones.

0.2

(Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. If a student decides to consume one additional hour of leisure time, how many hours of study time must she give up?

1

(Table: Coffee and Salmon Production Possibilities) Look at the table Coffee and Salmon Production Possibilities. The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for Alaska is:

1 coffee

(Figure: Comparative Advantage) Look at the figure Comparative Advantage. The opportunity cost of producing 1 box of oranges for Eastland is _____ box(es) of peaches.

10 WRONG

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. If the economy is producing at Y, the opportunity cost of producing at Z is _____ units of consumer goods per period.

8

Which of the following is a normative statement?

Government has grown too large and should be reduced.

In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessy has a larger oven and refrigerator. How does this affect his production possibility frontier?

It shifts his production possibility frontier out.

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has: Question 25 options:

a constant negative slope.

The production possibility frontier will shift outward for all of the following reasons EXCEPT:

an increase in the unemployment rate.

(Figure: Guns and Butter) Look at the figure Guns and Butter. This production possibility frontier is:

bowed out because of increasing opportunity costs.

The circular-flow diagram illustrates how households _____ goods and services and _____ factors of production.

buy; sell

(Figure: Guns and Butter) Look at the figure Guns and Butter. The combination of guns and butter at point H:

cannot be attained, given the level of technology and the factors of production available.

(Table: Coffee and Salmon Production Possibilities II) Look at the table Coffee and Salmon Production Possibilities II. This table shows the maximum amounts of coffee and salmon, both measured in pounds, that Brazil and Alaska can produce if they just produce one good. Brazil has an absolute advantage in producing:

coffee only

Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces. Colombia has a comparative advantage in _____ production and should specialize in _____. Question 9 options:

coffee; coffee

If an economy is producing a level of output that is on its production possibility frontier, the economy has:

no idle resources and is using resources efficiently.

As long as people have different _____, everyone has a comparative advantage in something.

opportunity costs

Figure: Comparative Advantage Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. (Figure: Comparative Advantage) Look at the figure Comparative Advantage. Eastland has an absolute advantage in producing:

oranges only

(Figure: Production Possibilities and Circular-Flow Diagram) Look at the figure Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram there is a significant increase in the amount of human capital flowing to both coconut producers and fish producers. If all other variables remain unchanged, then the adjustment in this economy would be best represented in the production possibilities figure by a movement from point A toward:

point C (a decrease in coconut production). WRONG

(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, inflation of 2%, and an expectation of 2% inflation. If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%, then inflation will:

rise to 4%

(Figure: Strawberries and Submarines) Look at the figure Strawberries and Submarines. As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine:

rises

Abe starts exercising regularly, and after a few months he can do twice as much of everything. In a single day Abe can now make 10 hamburgers or 8 milkshakes rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier has _____, but his opportunity costs of making milkshakes _____.

shifted right; are unchanged

(Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. The opportunity cost of producing the third unit of consumer goods is _____ units of capital goods.

six

(Table: Wheat and Aluminum) Look at the table Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows the maximum annual output combinations of wheat and aluminum that can be produced. Based on the table:

the United States has a comparative advantage in wheat and an absolute advantage in wheat.

To achieve the gains from trade, each nation should specialize in the production of a good or service if:

the country can make the product while forgoing fewer alternative products than any other country.

Which of the following is a positive economic statement?

there has been an increase in the rate of inflation.