chap 8

Which of the following benefits could a company gain from using internal markets?

Better allocation of its resources and more accurate predictions.

A person that has the _____ opportunity cost of producing a particular good is said to have _____.

lowest; a comparative advantage in the production of that good

When the price of firewood changes, Dan realizes that something must be different in the firewood market. Price is functioning as

a signal.

Jamie must give up the production of 75 ties to produce 25 additional sweaters. The opportunity cost of producing three ties is _____ sweater(s).

1

(Table: Bruno and Sasha's opportunity cost) The table provides data on the number of minutes it takes for Bruno and Sasha to each change a tire and iron a dress shirt. Use the data to answer the question. When changing a car's tire, Bruno's opportunity cost is _____, and Sasha's opportunity cost is _____.

1.5 ironed dress shirts; 1.67 ironed dress shirts

Jamie must give up the production of 75 ties to produce 25 additional dress shirts. The opportunity cost of producing four dress shirts is _____ ties.

12

In one day, Keshia can bake 10 muffins or mix 15 glasses of passion fruit juice. His friend Alicia can bake 10 muffins or mix 10 glasses of passionfruit juice. His other friend, Ewan, can bake 10 muffins or mix 20 glasses of passionfruit juice. Who has the LOWEST opportunity cost in muffin production?

Alicia

How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world?

An increase in the price of rice gives them a signal that rice is more valuable.

Barlow and Rusia own a nail salon. A manicure takes Barlow 60 minutes to complete and takes Rusia 45 minutes to complete. Completing a pedicure takes Barlow 45 minutes and takes Rusia 30 minutes. Who has a comparative advantage in manicures?

Barlow because he has a lower opportunity cost.

(Table: Mugs and Baseballs) Use Table: Mugs and Baseballs. Charlotte and Bernard make mugs and kites. Who has the comparative advantage in producing kites?

Bernard

(Table: Fazio and Gabriella's opportunity cost) The table provides data on how long it takes Fazio and Gabriella each to learn to play a particular new song on the piano and to complete a given person's tax return. Use the data to answer the question. Which statement explains who has a comparative advantage in completing tax returns?

Fazio because he gives up learning fewer new songs when he completes a tax return.

Which of the following pieces of advice is consistent with the principle of comparative advantage?

Focus on what you are relatively good at doing, even if you are not the best at it.

The price of celery rises, but nothing has changed on the supply side of the market. What does this mean to celery farmers?

It is a signal that celery is more valuable to consumers than it was before.

Which statement is TRUE?

It is possible to have no absolute advantage nut a comparative advantage in the production of some good.

(Table: Cooking time) The table provides data on how long it takes Marla and Jason to cook lasagna and cook chicken curry. Which statement explains who has a comparative advantage in cooking chicken curry?

Jason because he has a lower opportunity cost than Marla.

When people focus their efforts, on the tasks they have a comparative advantage in, what will happen to output?

More of all goods will be produced than if everyone produced everything for themselves.

Many buyers and sellers participate in the rice market. All their decisions in the rice market lead to the market equilibrium price. This describes which function of price?

Price aggregates information.

Barlow and Rusia own a nail salon. A manicure takes Barlow 60 minutes to complete and takes Rusia 45 minutes to complete. Completing a pedicure takes Barlow 45 minutes and takes Rusia 30 minutes. Who has a comparative advantage in pedicures?

Rusia because she has a lower opportunity cost.

If they produce only sandwiches, in a single day, Seraphim can produce 10 sandwiches, and Abigail can produce five sandwiches. If they make only root beer floats, in a single day, Seraphim can produce 10 root beer floats, and Abigail can produce four root beer floats. Therefore, _____ has an absolute advantage and a comparative advantage in making _____.

Seraphim; root beer floats

Which statement is NOT true?

Talented people may have a comparative advantage in everything they do, and untalented people may have a high opportunity cost in most things they do.

Why would a company set up internal markets?

To allocate the company's resources more efficiently.

Mara manages a yogurt factory where four main tasks are performed to produce the yogurt. What basis should she use to assign workers to the tasks if she wants to produce as much yogurt as possible?

Workers should specialize in the task for which they have a comparative advantage.

The price of a cup of coffee goes up. This communicates to Stella that coffee has become more valuable. Price is functioning as

a signal.

Chantelle grows tomatoes and sells them at the farmer's market. Because the price of tomatoes rises, she is encouraged to grow and sell more. This is an example of price functioning as

an incentive.

Harvey pays $8 to skate at the indoor ice rink once a month. The price rises to $10, and Harvey starts skating once every six weeks. This is an example of price functioning as

an incentive.

The price of coffee goes up, and Stella cuts back on her coffee consumption. This illustrates price functioning as

an incentive.

The principle of comparative advantage applies to interactions

between people as well as in business production decisions.

The person with the LOWEST opportunity cost of producing a particular good is said to have a(n):

comparative advantage

When everyone produces according to their comparative advantage, then they

gain from trade.

Roommates Samara and Zendaya are hosting a Christmas party and have to make snacks for their guests and ornaments for themselves. Samara and Zendaya know that to finish both tasks as quickly as possible, each should focus on just one task, but they don't know who should do what. Samara and Zendaya should determine which roommate:

has the comparative advantage in preparing snacks.

When people focus on their comparative advantage and then trade for other things, they:

improve their standard of living or increase their leisure time.

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

opportunity costs

Markets whose payoffs are linked to whether an uncertain event occurs are called _____ markets.

prediction

Markets _____, and this generates _____.

reallocate resources; gains from trade

Internal markets, which are markets that managers set up within their organization, are:

set up to allocate resources of a company more efficiently, often not using real money.

(Table: Fazio and Gabriella's opportunity cost) The table provides data on how long it takes Fazio and Gabriella to learn to play a particular new song on the piano and to complete a given person's tax return. Use the data to answer the question. Fazio's opportunity cost of learning the song is _____, and Gabriella's opportunity cost is _____.

two tax returns; 1.25 tax returns

(Table: Matcha Tea and Coho Salmon Production Possibilities) Use Table: Matcha Tea and Coho Salmon Production Possibilities. The table shows the maximum amounts of matcha tea and Coho salmon that Oregon and Washington can produce if each produces just one good. The opportunity cost of producing 1 unit of matcha tea for Oregon is _____ Coho salmon.

0.5

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. What is Marius's opportunity cost of producing one cupcake?

0.5 cookie

(Table: Four Persons) The table lists the minutes that it will take four persons to wash a car and to sort and fold a load of laundry. Use the data to answer the question. What is Jason's opportunity cost for sorting and folding a load of laundry?

0.5 of a car will not be washed.

(Table: Four persons) The table lists the minutes that it will take four persons to wash a car and to sort and fold a load of laundry. Use the data to answer the question. What is Junko's opportunity cost for washing a car?

2.4 loads of laundry will not be sorted and folded.

Chanda can change the oil in a particular car in 30 minutes. It takes 45 minutes for Deepa to change the oil in the same type of car. Which of the following statements is TRUE?

Chanda has an absolute advantage over Deepa in changing the oil.

What is the basis of specialization?

Comparative advantage

(Table: Four persons) The table lists the minutes that it will take four people to wash a car and to sort and fold a load of laundry. Use the data to answer the question. Who has a comparative advantage in washing a car?

Jen

If Bishan wants to capitalize on comparative advantage in his life, then he should:

do more of what he is relatively good at and then trade for other things.

(Table: Joachim and Zane's opportunity cost) The table provides data on how long it takes Joachim and Zane to clean the bathrooms and wash the windows at a home. Joachim's opportunity cost for cleaning bathrooms is _____, and Zane's opportunity cost for cleaning bathrooms is _____.

.4 of the windows washed; .5 of the windows washed

Jamie must give up the production of 100 ties to produce 50 additional sweaters. The opportunity cost of producing four ties is _____ sweater(s).

2 (found 100t:50s, so 2t:1s,)

Amy must give up the production of 100 ties to produce 50 additional dress shirts. The opportunity cost of producing four dress shirts is _____ ties.

8

(Table: Mugs and Baseballs) Use Table: Mugs and Baseballs. Charlotte and Bernard make mugs and kites. Who should specialize in the production of mugs?

Charlotte

(Table: Shrimp and Banana Production Possibilities) Use Table: Shrimp and Banana Production Possibilities. The table shows the maximum number of shrimp and bananas that Issa and Lawrence can produce if they produce only one good. In the absence of trade, Issa produces and consumes nine shrimp and two bananas, and Lawrence produces and consumes three shrimp and two bananas. Now they decide to engage in trade. Which statement is INCORRECT?

For both to become better off, each should specialize in the production of some good. However, since Henry is equally productive in both goods, it doesn't matter which good each specializes in.

If they bake only muffins, in a single day, Gregory can bake 10 muffins, and Gabriella can bake five muffins. If they bake only cookies, in a single day, Gregory can bake 10 cookies, and Gabriella can bake four cookies. We know that _____ has an absolute advantage and a comparative advantage in baking _____.

Gregory; cookies

Which of the following headlines is NOT consistent with the principle of comparative advantage?

Island lessens welfare by promoting trade.

Use the data in the table to answer the question. The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. Who has a comparative advantage in mowing lawns?

Juanita because she has a lower opportunity cost

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write five. If they spend all night making sunglasses, Laurence can make six pairs, and Carrie Anne can make four. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____.

Laurence; both programs and sunglasses

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that:

Leticia's opportunity cost of writing poems is less than Isabella's.

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that _____ has a comparative advantage in _____.

Leticia; poems

Marius and Jennifer are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, Marius can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. Based on this information, _____ has the comparative advantage in cupcakes, and _____ has the comparative advantage in muffins.

Marius; Jennifer

(Table: Cooking time) The table provides data on how long it takes Marla and Jason to cook lasagna or chicken curry. Which statement explains who has a comparative advantage in cooking lasagna?

Marla because she has a lower opportunity cost than Jason.

Why would Emerald benefit from specializing based on comparative advantage?

She could enhance her living standards.

When a manager uses comparative advantage to assign tasks in a workplace, then each

task is assigned to the worker with the lowest opportunity cost for performing the task.

When trade is based on comparative advantage

both trading partners end up better off than when there is no trade.

Trade can be beneficial to trading partners because:

it enables more goods and services to be obtained at a lower opportunity cost.

Gabriella starts using a new baking technique, and she can now do twice as much of everything. In a single day, Gabriella can now bake 10 muffins or eight cookies, rather than the five muffins and four cookies she could previously bake. Gabriella's production possibility frontier has _____, and her opportunity cost of making cookies _____.

shifted right; is unchanged