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Exam 2: The Production Possibility Model, Trade, and Globalization

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Question 31

Multiple Choice

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Which of the following is the best example of an economic precept?

A) Predictable irrationality
B) The supply/demand model
C) The production possibility model
D) Laissez-faire

E) All of the above
F) None of the above

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Question 32

Multiple Choice

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In the linear equation y = mx + b, an increase in b will:

A) shift the curve up.
B) shift the curve down.
C) cause the curve to become steeper.
D) cause the curve to become flatter.

E) C) and D)
F) A) and B)

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Question 33

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Suppose that in Slovakia one unit of labor can produce either 16 tons of wheat or 32 tons of soy and in Poland one unit of labor can produce either 4 tons of wheat or 2 tons of soy. Given this information, which of the following statements is true?

Refer to the production possibility curve for Ricardia below. The graph indicates that with the resources and technology it has available, Ricardia:

If a production possibility curve representing a trade-off between a grade in English and a grade in math has a negative slope, we know that:

Consider the following information, which provides percentage change in GDP per year: $\begin{array} { | l | r | } \hline & \text { Per centuge increase in GDP } \\\hline 2012 & - 10 .0 \\\hline 2013 & - 5 . 0\\\hline 2014 & - 5 .0 \\\hline 2015 & 4.0 \\\hline 2016 & 10 .0 \\\hline\end{array}$

Two countries that specialize their production along the lines of comparative advantage and then trade with each other will be able to:

The law of one price means that prices eventually will be the same in all countries and eventually countries will not have a reason to trade.

Trade based on comparative advantage benefits:

Refer to the graph shown. If Countries X and Y face the production possibility curves A and B, respectively, Country Y has a comparative advantage in the production of:

Refer to the graph below. Suppose that the opportunity cost of producing 10 chickens is always 8 turkeys. Given this, the relevant production possibility curve must be:

The Bahamas and India produce both pineapple and rice (both measured in tons).The table below illustrates their production possibilities. $\begin{array} { c } { \text { The Bahamas } } \quad\quad\quad { \text { India } } \quad\quad\quad\\\begin{array} { r c r r } \text { Rice } & \text { Pineapple } & \text { Rice } & \text { Pineapple } \\0 & 100 & 0 & 50 \\5 & 90 & 5 & 47.5 \\10 & 80 & 10 & 45 \\15 & 70 & 15 & 42.5 \\20 & 60 & 20 & 40 \\25 & 50 & 25 & 37.5 \\50 & 0 & 100 & 0\end{array}\end{array}$ (a)In the Bahamas,what is the opportunity cost of a ton of pineapples,and of a ton of rice? (b)In India,what is the opportunity cost of a ton of pineapple,and of a ton of rice? (c)Which country has a comparative advantage in the production of pineapple? (d)Show how if each country specialized in that good for which it has a comparative advantage and split the resulting production,each would be able to consume more than if they did not trade.

The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires. Suppose two companies are buying morels from workers willing to find them. One company offers to pay workers $5.00 per pound, and the other company will pay workers only $4.00 per pound. Economists would say that:

Investment in capital goods is one way to increase the standard of living in the future. Investment in capital goods, however, means that we must forgo consumption today. One of the trade-offs facing an economy is the balance of consumption today with that of the future. The following table shows such a trade-off. With this information we know that the opportunity cost of which of the following is the greatest? $\begin{array}{l}\begin{array} { | c | c | } \hline\text { Current consumptinn }& \text { Future conguptinn }\\\hline 800 & 100 \\\hline 750 & 260 \\\hline 650 & 340 \\\hline 600 & 380 \\\hline 550 & 400 \\\hline\end{array}\end{array}$

If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2, and U.S. workers produce 9 times as much output per hour as Mexican workers, then, all else equal, it would be efficient to locate production facilities in:

England has a relatively cool and cloudy climate that is ill suited for grape growing. It can produce 200 units of wine for every 400 units of cloth. Portugal, in contrast, has a relatively warm and sunny climate that is good for growing grapes. It can produce 200 units of wine for every 100 units of cloth. Which country has the higher opportunity cost of producing cloth?

If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2, and U.S. workers produce 5 times as much output per hour as Mexican workers, then, other things equal, it would be efficient to locate production facilities in:

If there is an inverse relationship between two variables, the graph relating the two variables will be:

With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is: $\begin{array} { | c | c | } \hline \text { Number af Ums } & \text { Number af Umies } \\\hline 60 & 0 \\\hline 40 & 30 \\\hline 20 & 60 \\\hline 0 & 90 \\\hline\end{array}$

Refer to the graph below. As you move from point A to point B: