Macroeconomics Review 2

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

25 silk leaves

According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

Fewer goods will be produced for consumption today

Which of the following statements is true?

Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. advantage between the two countries?

Italy has the comparative advantage in wine

If opportunity costs are constant, the production possibilities frontier would be graphed as

a negatively sloped straight line

The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by

a point inside the frontier

Comparative advantage means the ability to produce a good or service

at a lower opportunity cost than any other producer

You have an absolute advantage whenever you

can produce more of something than others with the same resources

The ________ demonstrates the roles played by households and firms in the market system.

circular flow model

An outward shift of a nation's production possibilities frontier represents

economic growth

BMW recently decided to build a manufacturing plant in Shenyang, China. At this plant, BMW is able to take advantage of paying lower wages to its Chinese workers than it pays its German workers, but it also sacrifices the high levels of technical training possessed by its German workers. In deciding to open the Shenyang plant, BMW

faced a trade-off between higher cost and lower precision

Rayburn Reed is a highly talented photographer. He has chosen to specialize in photography because of all of the following except

his opportunity cost of pursuing another career is very low

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced

In a production possibilities frontier model, a point ________ the frontier is productively inefficient.

inside

If society decides it wants more of one good and all resources are fully utilized, then

it has to give up some of another good and incur some opportunity costs

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit of a good

Households______ final goods and services in the ______ market.

purchase; product

If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should

specialize in being a surgeon because its opportunity cost is lower

The attainable production points on a production possibility curve are

the points along and inside the production possibility frontier

The points outside the production possibilities frontier are

unattainable

A successful market economy requires

well-defined property rights and an independent court system to adjudicate disputes based on the law