ECON HW 2

If the two countries specialize and trade, who should export cell phones?

Finland

If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods.

True

If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the

factor market.

In the circular flow diagram, economic agents M represent

households

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

invisible hand

If the production possibilities frontier is linear, then

opportunity costs are constant as more of one good is produced.

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights

An outward shift of a nation's production possibilities frontier can occur due to

an increase in the labor force

The ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.

attainable

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

The circular flow model demonstrates

the roles played by households and firms in the market system.

Published in 1776, ________ was written by Adam Smith.

"An Inquiry into the Nature and Causes of the Wealth of Nations"

Which of the following countries does not come close to the free market benchmark?

Cuba

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking.

False

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.

False

Which country has a comparative advantage in the production of coconuts?

Guatemala

A welding machine is an example of a factor of production if it is being used to produce automobiles.

True

What is the opportunity cost of one dozen roses?

0.4 dozen orchids

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

Switzerland has the comparative advantage in watches.

Increasing marginal opportunity cost implies that

the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.