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ECONOM 1014 Chapter Notes - Chapter 2: Comparative Advantage, Absolute Advantage, Opportunity Cost

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ceruleanwhale326

8 Apr 2016

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Trade makes people better off when preferences differ, trade increases productivity through specialization and the division of. Absolute advantage: the ability to produce the same good using fewer inputs than another producer. The (opportunity) cost of a shirt in the united. States is one computer but the (opportunity) cost of a shirt in mexico is just one-sixth of a computer. Thus, even though mexico is less productive than the united states, mexico has a lower cost of producing shirts! Free market: all workers of the same type will earn the same wage and the same good will tend to sell for the same price everywhere. Only when workers of the same type are paid the same wage is there no incentive for workers to move. Otherwise, if workers in different fields of manufacturing (computers and shirts) are paid different wages, they"ll keep wanting to move to the job that"s paid the best.

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Related Questions

1. Which of the following cannot be determined using a production possibility table?

What combination of outputs can be produced.
How much less of one output can be produced if more of another output is produced.
What combination of outputs is best.
How much output can be produced from a given level of inputs.

2. Internal government debt is:

debt owed by citizens to their government.
debt owed by one government to another government.
government debt owed to citizens.
government debt owed to foreigners.

3. In general, budget deficits should:

never be run since they slow economic growth over the long run.
never be run since they crowd out investment in the short run.
be run on a temporary basis whenever the economy is below potential output.
be run on a permanent basis since they can always be financed over and over again.

4. If taxes and government outlays were constant and did not vary with income, then:

passive deficits would increase.
passive deficits would not exist.
structural deficits would increase.
structural deficits would not exist.

5. If the debt of the federal government increases by $10 billion in one year, then the budget:

deficit in that year must be $10 billion.
surplus in that year must be $10 billion.
deficit in that year decreased by $10 billion.
surplus in that year increased by $10 billion.

6. Which of the following would make the impending Social Security problem worse?

Raising income taxes when the baby boomers begin to retire.
Reducing the age at which one is eligible to receive payments.
Reducing Social Security retirement benefits.
Introducing means testing.

7. The price mechanism is: (Points : 5)

not affected by social and political forces.
affected by social but not political forces.
affected by political but not social forces.
affected by both political and social forces.

8. Social forces:

affect the price mechanism through cultural norms.
affect the price mechanism, but not the legal system.
affect the price mechanism through scarcity.
do not affect the price mechanism.

9. Opportunity cost is the same as marginal cost.

10. Which of the following is a characteristic of a market economy?

Private property.
Government ownership of the means of production.
Distribution according to need.
Tradition determines the what, how, and for whom decisions.

11. Mexico has a comparative advantage in producing corn:

if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
regardless of the opportunity cost in other countries.

12. The opportunity cost for a student of attending college for a year is best measured by the:

benefit received by the student.
tuition paid for the year.
value of the next-best activity forgone by attending college.
total money outlays associated with attending college.

13. A passive deficit is the portion of the deficit that exists when:

the economy is at potential income.
the economy is beneath potential income.
inflation is not fully anticipated.
inflation is fully anticipated.

14. An important international lending institution is the:

IMF.
The Group of Eight.
EU.
WTO.

15. Private property rights:

are essential elements of a market economies.
do not need to be enforced in market economies.
must be established before a socialist economy can function properly.
ensure an equitable distribution of income in market economies.

16. If a country has a comparative advantage in the production of a good, then its resources are better suited to the production of that good than the resources of other countries.

17. As the interest rate rises, debt service:

decreases.
does not change, but debt increases.
increases.
does not change and neither does the debt.

18. Your opportunity cost of taking this course is:

the tuition you paid for the course.
the benefit of the activity you would have chosen if you had not taken the course.
the benefit you get from taking this course.
the cost of the activity you would have chosen if you had not taken the course.

19. One advantage of a corporation over a sole proprietorship is:

greater accountability.
avoidance of double taxation.
ease of formation.
greater ability to obtain funds.

20. Maintaining objectivity is easiest in:

positive economics.
the art of economics.
normative economics.
it is just as easy in all of the above

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