HW #2

Published in 1776, ________ was written by Adam Smith.

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

All of the following are examples of spending on goods and services in the circular flow model except

Chaitanya buys a new spa pedicure chair for her expanding nail salon business

In economics, the term "free market" refers to a market where no sales tax is imposed on products sold.

False

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

False

________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The production possibilities frontier model

Consider a country that produces only two goods: pineapples and tractors. Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors. In this case, its current output combination is inefficient.

True

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it can still benefit by trading with the other country.

True

An example of a factor of production is

a worker hired by an auto manufacturer

If you can produce more of something than others with the same resources, you have

an absolute advantage

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

an increase in the labor force

The ability to exercise control over one's own resources within the confines of the law refers to

one's property rights

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?

produce 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