Chapter 2: Trade-offs, Comparative Advantage, and the Market System
According to the theory of comparative advantages, specialization and free trade will benefit
all trading partners who specialize in goods where they have comparative advantage
Ms. Boulware is the best lawyer and the best secretary in town. She has
an absolute advantage in both jobs
A product produced in a foreign country and purchased by residents of the home country is called
an import
In what type of economy does the government decide how most economic resources will be allocated?
centrally planned economy
In the circular flow diagram, which arrow shows the flow of goods and services?
B
In the graph above, which of the following combinations of pies and cakes is unattainable given the existing resources?
Four cakes and seven pies
What are copyrights designed to accomplish?
Protect intellectual property rights
When nations specialize in their comparative advantage and engage in trade
overall standards of living increase
Absolute advantage is the ability of an individual, firm, or country to
produce more of a good or service than competitors using the same amount of resources
The role of the entrepreneur always involves
taking risks
In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?
the division of labor
If a country has a comparative advantage in the production of a good, then that country
has a lower opportunity cost in the production of that good
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _______ the payoff to devoting additional resources to that activity
smaller