Macro HW 2 Study

The ability of one producer to produce one good or service using fewer inputs than another producer is:

absolute advantage.

Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in: I. wages in both countries. II. total output in both countries. III. living standards in both countries.

I, II, and III

(Figure: PPF Nickel & Textiles) Refer to the figure. How many tons of textiles does Australia give up to produce one ton of nickel?

1/3

(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are:

1/6 of a computer for Mexico and one computer for United States.

(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of nickel China can produce?

8 tons

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.

Specialization and trade can _____ the per unit cost of production because _____ .

decrease; it creates economies of scale associated with large-scale production

(Figure: PPF Mexico & United States) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______, and the United States has a comparative advantage in ______.

shirts; computers

(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:

six shirts for Mexico and one shirt for the United States.

The production possibilities frontier shows:

the combinations of outputs a country can produce given its resources and productivity.