Economics CH3

Assume there are 4 million total workers. Also assume that each worker takes one day to make a shirt or half a day to grow a bushel of wheat. The number of workers making shirts equals X, and the number growing wheat equals ½ of Y. We can write this in equation form as X + (1/2)Y = 4 million. The slope of the production possibilities frontier is

-2.

Suppose country A can produce 50 shirts or 200 bushels of wheat; and country B can produce 25 shirts or 50 bushels of wheat. The opportunity cost of making a shirt for country B is

1/2 bushels of wheat

Suppose country A can produce 50 shirts or 200 bushels of wheat; and country B can produce 25 shirts or 50 bushels of wheat. The opportunity cost of growing a bushel of wheat for country A is

1/4

Suppose country A can produce 50 shirts or 200 bushels of wheat; and country B can produce 25 shirts or 50 bushels of wheat. The opportunity cost of making a shirt for country A is

4 bushels of wheat.

Points inside the production possibilities frontier are

Achievable, but don't make full use of all available resources.

Who is credited with first using the term 'invisible hand' to describe this coordinating mechanism

Adam Smith

How does the production possibilities frontier help us answer economists' second question, "What are the trade-offs?"

Along the PPF, in order to get more of one thing, you must give up some of another thing.

Suppose the production possibilities frontier pivots up so that more of the good on the y-axis can be produced using the same amount of resources. What is the likely cause of this?

An improvement in the technology used to produce the good on the y-axis

If a country can make a good at a lower opportunity cost than another country, that country has a(n) advantage.

Comparative

True or false: Points inside the production possibilities frontier are achievable, but still make full use of all available resources.

False

Which of the following statements is true?

No producer has a comparative advantage at everything, and each producer has a comparative advantage at something.

When the working population decreases, the production possibilities frontier

Shifts inward

A country can have a comparative advantage without having an absolute advantage. True false question.

True

True or false: Based on the assumption of efficiency, we can predict that an economy will choose to produce at a point on the frontier rather than inside it.

True

A shift in the production possibilities frontier is due to a change in ------- A pivot of the production possibilities frontier is due to a change ----

Workers Products

A producer has a comparative advantage when they can produce

a good at a lower opportunity cost.

A country has a(n) , ______ advantage over another country in product

absolute

If a producer can generate more output than others with a given amount of resources, that producer has a(n) advantage.

absolute

If a country can produce more of a good or service, it has a(n) ----- advantage. If the country can produce a good or service at lower opportunity cost, it has a(n) ----m advantage Listen to the complete question

absolute comparative

The production possibilities frontier helps us answer economists' first question—"What are the wants and constraints of those involved?"—because it shows Multiple choice question.

all possible combinations of outputs that can be produced with ideal resources.

Production Possibilities Frontier (PPF)

all the possible combinations of two outputs that can be produced using all available resources.

When individuals seek to make a profit and specialize according to their comparative advantage, we could say that the system operates as though there was

an invisible hand.

When producers specialize in making a particular good according to their comparative advantage, total production possibilities

are greater than if each produced the combination of goods they themselves want to consume.

When opportunity costs are increasing, the shape of the production possibilities frontier is a (only one word per blank) curve.

concave

'' The production possibilities frontier gives us a way to represent the, ------ on production.

constraints

Geographic shifts in the production of clothing has occurred, in large part, because of lower relative

costs

Gains from trade are realized if

countries specialize in the good for which they have a comparative advantage and then trade with each other

There is room for trade as long as the two countries

differ in their opportunity costs to produce a good and they set a trading price that falls between those opportunity costs.

Points along the production possibilities frontier are attainable and____

efficient

The functioning of the invisible hand depends on some assumptions, such as

free competition and full information.

When countries specialize in the good for which they have a comparative advantage and then trade with each other,

gains from trade are realized

When countries specialize in the good for which they have a comparative advantage and then trade with each other, Multiple choice question.

gains from trade are realized

When a country specializes, in order to have all the goods they want to consume, they must

gains from trade.

When a producer has an absolute advantage they can

generate more output than others with a given amount of resources.

If each country focuses on producing the good for which it has a comparative advantage, total production

increase

The opportunity cost of producing one good in terms of the other typically ------- as more of a good is produced, because skills vary among workers.

increases

Assume that all workers cannot produce the same amount of each good. The opportunity cost of producing one good in terms of the other

increases as more of a good is produced, because skills vary among workers.

Assume that all workers cannot produce the same amount of each good. The opportunity cost of producing one good in terms of the other Multiple choice question.

increases as more of a good is produced, because skills vary among workers.

Specialization _____.

increases total production, using the same number of workers and the same technology.

'' Points inside the production possibilities frontier are attainable but ------- (one word) because they do not use all available resources.

inefficient

If we specialize in the good for which we have a comparative advantage and trade for the other good,

it is possible to consume at a level beyond our own production possibilities.

When an economy chooses a point inside the production possibilities frontier, it can produce ______ goods by using all the available resources.

more

A country has an absolute advantage over another country if they can produce

more of a good than the other country.

When an economy appears to be guided by an invisible hand, _____

no government intervention is required to coordinate production

Based on the assumption of efficiency, we can predict that an economy will choose to produce at a point

on the frontier rather than inside it.

A problem with specialization is that each producer may end up with only ----- good(s).

one

Along a straight line production possibilities curve, the slope of the line measures the ______ cost of one good in terms of the other.

opportunity

When the production possibilities frontier is concave, Multiple choice question.

opportunity costs are increasing.

Points that lie (one word) the production possibilities frontier are unattainable.

outside

When technology improves the production of one good, the production possibilities frontier

pivots outward.

The production possibilities frontier shows the ______.

production constraint of two outputs that can be produced using all available resources

The first question economists use to break down problems—"What are the wants and constraints of those involved?"

production possibilities frontier.

Each producer's opportunity cost depends on its

relative ability to produce different goods.

Positive changes in comparative advantage often

result in economic growth.

When the working population decreases, the production possibilities frontier

shifts inward.

When the working population increases, the production possibilities frontier

shifts outward.

When the working population increases, the production possibilities frontier ________, but when technology improves the production of one good, the frontier __________.

shifts right; pivots outward.

When people produce ----- and trade, everyone gets more of the things they want.

specialize

If each country focuses on producing the good for which it has a comparative advantage, the country would

specialize in production of that good.

When opportunity costs are increasing, the slope of the production possibilities frontier becomes

steeper as you move along the production possibilities frontier.

The opportunity cost of one good is

the amount of the other good that must be given up.

The two main factors that drive the change in U.S. production possibilities are

the number of workers and changes in technology.

Along a straight line production possibilities curve, the slope of the line measures

the opportunity cost of one good in terms of the other.

A country has a comparative advantage over another country if they can produce

the same amount of a good as the other country but at a lower opportunity cost.

If two countries have different opportunity costs and they set a favorable trading price, Multiple select question.

there are gains to be had from trade there is room for trade

The production possibilities frontier helps us answer economists' second question "What are the trade-offs?" because Multiple choice question.

there is a trade-off between the production of the two goods.

In the nineteenth century, the United States snatched the comparative advantage in clothing

through a combination of new technology and cheap labor.

It is possible to consume at a level beyond our own production possibilities if

we specialize in the good for which we have a comparative advantage and trade for the other good.