CH 8 Econ

The high marginal cost of producing more quinoa leads to _____ because it is difficult for farmers to expand the farmland. a low price of quinoa more demand for quinoa less demand for quinoa a high price of quinoa

a high price of quinoa

For suppliers, a _____ is an incentive to _____, because there are few profit opportunities.

low price, decrease production

For potential buyers, a rising price _____ of consuming a good, creating an incentive to consume less. raises the opportunity cost lowers the marginal cost lowers the opportunity cost raises the marginal cost

raises opportunity cost

How do Chinese tea farmers learn about a rise in the popularity of tea in the West? They observe internal tea markets. They communicate with buyers through price. They send messages about the benefits of tea. They learn that Westerners love tea products.

they communicate with buyers through price

Lakisha and Zara are partners in a small suburban law office. They want to determine who should deal with employment contracts. Lakisha can write a will in 3 hours, or an employment contract in 4 hours. Zara is slower, and it takes her 4 hours to write a will, and 8 hours to write an employment contract. What are the opportunity costs for Lakisha and Zara to produce an employment contract?

Lakisha 4/3, Zara 2

"Tea is now more valuable— make more tea!" This is a clear message to:

tea farmers

Decision makers need to acquire essential information to make a sensible decision. When the information is not available for them, this creates: gains from trade. internal markets. a knowledge problem. prediction markets.

knowledge problem

Lakisha and Zara are partners in a small suburban law office. They want to determine who should deal with employment contracts. Lakisha can write a will in 3 hours, or an employment contract in 4 hours. Zara is slower, and it takes her 4 hours to write a will, and 8 hours to write an employment contract. Who has a comparative advantage in writing an employment contract, and what is their opportunity cost?

Lakisha 4/3

A manager of an advertising company was just assigned a new project to create a website and produce a video presentation. She must assign these tasks to her team. Alexa can write the content in 4 hours and edit the video presentation in 3 hours. Hoshi can write the content in 3 hours and edit the video presentation in 1 hour. Who should write the content and why? Alexa, because she has a comparative advantage in content writing. Hoshi, because he has the lowest opportunity cost, at 1/3 of a video presentation. Hoshi, because he has an absolute advantage in content writingAlexa, because she has the lowest opportunity cost, at 3/4 of a video presentation.

alexa because she has a comparative adv in content writing

As two housemates divide chores between them, they have to decide who should sweep the floor and who should mow the lawn. In this case, the opportunity cost of sweeping the floor is the _____. amount of lawn that could have otherwise been mowed number of hours spent sweeping the floor number of hours spent mowing the lawn amount of the house that could have otherwise been swept

amount of land that could have otherwise been mowed

Which of the following provides an example of the knowledge problem? Gas station managers using futures contracts to lock in the price of oil Executives at Feeding America needing accurate forecasts of the number of each type of meal they'll donate each week The rapid increase in price of cheese that causes people to donate less cheese An executive of Feeding America that cannot make a decision about which food bank locations are in need of cheese

an executive of feeding america that cannot make a decision about which food bank locations are in need of cheese

Many buyers use futures contracts to agree to purchase a commodity at a specific time in the future. What is one benefit of looking at the prices of such futures contracts to businesses that produce these commodities? It allows businesses to fully eliminate risk. Businesses can buy and sell commodities in the internal markets. Businesses can obtain useful information about possible future disruptions to input costs. Businesses can use opportunity costs to calculate their absolute advantage.

businesses can obtain useful info about possible future disruptions to input costs

Reallocation generates _____ because we reallocate tasks to the _____ producer. gains from trade; highest cost gains from trade; lowest cost absolute advantage; lowest cost absolute advantage; highest cost

gains from trade, lowest cost

What is a lesson learned for the management of individual companies from the Korean peninsula? Firms should let centralized managers allocate scarce resources. Firms should rely on the judgment of the management. They should leave the market forces alone. They should harness the power of market forces.

harness the power of market force

Markets allow you to trade tasks because each task should be done at the: lowest possible marginal cost. highest possible opportunity cost. highest possible marginal cost. lowest possible opportunity cost.

lowest possible opportunity cost

Prediction markets are different from other markets in that: prices are based on the future. prices can be used to aggregate information. they provide businesses with useful intelligence. prices do not reflect supply and demand.

prices based on future

Each of us spends money to buy stuff made by skilled engineers who have a comparative advantage in making cars or dishwashers. This is an example of: absolute advantage. resources. specialization. internal markets.

specialization

When a company like Google, which allows its workers to widely distribute information, sets up its own prediction market, what is the outcome? The internal prediction markets used yield better, more accurate forecasts. This refers to using internal analysts to do the forecasts. The internal prediction markets yield less accurate forecasts than analysts do. This creates a knowledge problem due to the abundance of information.

the internal prediction markets used yield better, more accurate forecasts