ECON HW 2

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

Costa Rica

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

Cuba

For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia can produce 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries?

Hungary has the comparative advantage in beer.

A movement from ________ is the result of advancements in plastic production technology.

Y to Z

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

an increase in the labor force

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 principle of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up.

opportunity cost

In a production possibilities frontier model, a point inside the frontier is

productively inefficient.

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

setting up and enforcing private property rights

Increasing opportunity cost along a bowed-out production possibilities frontier occurs because

some factors of production are not equally suited to producing both goods or services.

The circular flow model demonstrates

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

What is the opportunity cost of one dozen roses?

0.4 dozen orchids

Which of the following is an example of spending on goods and services in the circular flow model?

Chester buys a first-class ticket from Atlanta to London for his long-awaited vacation.

Which of the following is an example of spending on factors of production in the circular flow model?

The "Lucky Ducky" casino buys a new craps table for the casino floor.

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

False

In the circular flow model, households demand resources such as labor services in the product market.

False

The idea underlying Adam Smith's "invisible hand" is that people tend to behave in ways that go unnoticed in society.

False

A worker is hired in a

factor market.

In the circular flow diagram, market K represents

factor markets.

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