Macroeconomics Review 2
Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?
25 silk leaves
According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?
Fewer goods will be produced for consumption today
Which of the following statements is true?
Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. advantage between the two countries?
Italy has the comparative advantage in wine
If opportunity costs are constant, the production possibilities frontier would be graphed as
a negatively sloped straight line
The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by
a point inside the frontier
Comparative advantage means the ability to produce a good or service
at a lower opportunity cost than any other producer
You have an absolute advantage whenever you
can produce more of something than others with the same resources
The ________ demonstrates the roles played by households and firms in the market system.
circular flow model
An outward shift of a nation's production possibilities frontier represents
economic growth
BMW recently decided to build a manufacturing plant in Shenyang, China. At this plant, BMW is able to take advantage of paying lower wages to its Chinese workers than it pays its German workers, but it also sacrifices the high levels of technical training possessed by its German workers. In deciding to open the Shenyang plant, BMW
faced a trade-off between higher cost and lower precision
Rayburn Reed is a highly talented photographer. He has chosen to specialize in photography because of all of the following except
his opportunity cost of pursuing another career is very low
The production possibilities frontier model shows that
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good
A production possibilities frontier with a bowed outward shape indicates
increasing opportunity costs as more and more of one good is produced
In a production possibilities frontier model, a point ________ the frontier is productively inefficient.
inside
If society decides it wants more of one good and all resources are fully utilized, then
it has to give up some of another good and incur some opportunity costs
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.
linear
The slope of a production possibilities frontier
measures the opportunity cost of producing one more unit of a good
Households______ final goods and services in the ______ market.
purchase; product
If the best surgeon in town is also the best at cleaning swimming pools, then according to economic reasoning, this person should
specialize in being a surgeon because its opportunity cost is lower
The attainable production points on a production possibility curve are
the points along and inside the production possibility frontier
The points outside the production possibilities frontier are
unattainable
A successful market economy requires
well-defined property rights and an independent court system to adjudicate disputes based on the law