ECON-UA 12 Lecture Notes - Comparative Advantage, Opportunity Cost, Phillips Curve

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browncoyote420

25 Jul 2014

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Us can produce 1 ton of wheat = 1 ton of corn, 1 c = 1 w. Brazil can produce 1 ton of wheat = 2 tons of corn, 1 c = 1/2 w. For us, op. cost of producing wheat is lower, and comparative advantage in wheat production. 2 yrs later -> x(1+c)(1+c) > x= 1000/(1+c)^2. Present discounted value (?: more consumer surplus important fair distribution of income low unemployment rate. * resources are limited, our wants are infinite: going to college.

Related Questions

1. Which of the following actions reflect self-interested behavior?
(i) Warren Buffett, one of the world's wealthiest individuals, donated more than $30 billion to humanitarian causes such as AIDS and tuberculosis initiatives.
(ii) Pfizer Inc., a private pharmaceutical company, sponsored a disease-management program for Florida's Medicaid patients with chronic illnesses such as asthma, diabetes and heart disease.
(iii) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class.
(iv) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class only if your mother pays you $8 an hour.
A. (iv) only
B. (ii) and (iii) only
C. All of the above actions except (iii)
D. All of the above actions

2. Unlimited wants and limited resources:
A. Can be overcome through innovation
B. Can be overcome by increasing wealth
C. Are not problems faced by wealthy industrialized nations
D. Necessitate choices about the goods to services to consume

3. The production possibilities frontier can be used to demonstrate which of the following?
(i) The best tradeoffs that individuals and societies should make
(ii) The tradeoffs forced on individuals and societies because of scarcity
(iii) The wealth maximizing output combination that an individual or society should choose
A. (i), (ii) and (ii)
B. (i) only
C. (ii) only
D. (iii) only

Figure 1-1 shows the production possibility frontier for the hypothetical country, Lindenderry, which produces only two goods: corn and automobiles. Assume that Lindenderry uses all its productive resources to their maximum capacity.

Figure 1-1

4. If Lindenderry is using its productive resources to their maximum capacity, it must be producing a combination of goods given by a point such as:
A. Point U, V or W
B. Point U, X or W
C. Point V, U or T
D. Point X

5. If Lindenderry is at point U, producing 1300 tons of corn and 34 million automobiles, what is the opportunity cost of an additional 11 million automobiles?
A. 1,100 tons of corn
B. 2,200 tons of corn
C. 200 tons of corn
D. 18.2 tons of corn

6. Suppose Lindenderry is at point S, producing 700 tons of corn and 56 million automobiles. What happens if it sacrifices 11 million automobiles?
A. It moves to point T and gains 400 tons of corn
B. It moves to point T and gains 1,110 tons of corn
C. It moves to point W and gains 700 tons of corn
D. It moves to point W and loses 11 million automobiles

7. Suppose the price of a banana is $0.50, the price of a can of soda is $1.00 and the price of a power bar is $1.50. What is the opportunity cost of a banana?
A. $0.50
B. 1/2 of a power bar
C. 1/3 of a can of soda
D. 1/2 can of soda or 1/3 of a power bar

8. Which of the following statements is false?
A. Mother Teresa faced trade-offs when deciding to help lepers in India rather than some other needy group
B. When the government funds research into cancer, it is able to avoid trade-offs because public funds are used rather than private funds
C. When you volunteer to help at a soup kitchen, you face an opportunity cost of your time
D. Economics brings tradeoffs to light but does not inform us of which trade-offs society should make

9. Which the following would be likely to raise your opportunity cost of going to college full-time?
(i) You have been offered a full-time job as wardrobe assistant to Paris Hilton that pays $60,000 per year.
(ii) You have been offered a merit scholarship that pays for two years of tuition.
(iii) Your landlord increases the rent on the apartment you are currently living in and will continue to live in even if you choose to attend college full-time.
(iv) An increase in the value of your college trust fund set up by your grandfather.
A. All of the above
B. All of the above except (ii)
C. (i) only
D. (i) and (iii) only

Suppose Galesburg produces only two goods: textiles and wheat. Table 1-1 shows the combinations of the two goods that Galesburg can produce if it uses all its productive resources to their maximum capacity.

Table 1-1

10. If Galesburg is currently producing at point H, what is the opportunity cost of obtaining an additional 100 bushels of wheat?
A. 360 bales of textiles
B. 240 bales of textiles
C. 60 bales of textiles
D. 20 bales of textiles

11. Suppose Galesburg is currently producing at point K and would like to move to point J. This movement:
A. Enables it to obtain an additional 20 bales of textiles and an additional 60 bushels of wheat
B. Requires a sacrifice of 60 bushels of wheat to obtain an additional 20 bales of textiles
C. Enables Galesburg to increase textile production with no reduction in wheat production
D. Suggests that point K is an inefficient choice for Galesburg

12. Suppose Galesburg is currently producing 60 bales of textiles and 200 bushels of wheat. Which of the following statements is true?
A. It is not possible to produce more wheat without sacrificing any textiles
B. It is possible to produce more wheat without sacrificing any textiles
C. The people of Galesburg do not value wheat as highly as they value textiles
D. The price of wheat must have fallen, so producers have reduced their supply of wheat

13. Suppose the people of Galesburg want to consume 50 bales of textiles and 310 bushels of wheat. Are they able to achieve this?
A. Yes, if they are willing to pay higher prices for these products to induce suppliers to produce them
B. No, at this time Galesburg has insufficient resources to satisfy its consumers' wants
C. Yes, if they rearrange their resource use so as to increase total output
D. No, Galesburg must increase its money supply in order to do so

14. The opportunity cost of an item is:
A. The price you paid to acquire that item
B. What you could have bought if you did not purchase that item
C. What it costs to make that item
D. Higher than what you paid to obtain that item

15. The opportunity cost of an item is:
A. The value of all the alternatives that must be given up in order to engage in any economic activity
B. The average value of all the alternatives that you forego in order to engage in any economic activity
C. The highest-valued alternative that must be given up in order to engage in any economic activity
D. The lowest-valued alternative that must be given up in order to engage in any economic activity

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Question 6: Which of the following economic goals focuses on equal opportunities for education? (5 points)

-Equity

-Freedom

-Growth

-Security

Question 7: Marcel takes out student loans and works part-time to put himself through college. In time, he earns an advanced medical degree and goes to work in an understaffed city -hospital. Marcel's economic decisions benefit the goal of efficiency by (5 points)

-making his own job

-related decisions

-paying back loans to reduce the debt

-contributing to the nation's productivity

-taking advantage of equal opportunities

Question 8: Two countries produce milk and dairy products efficiently. Neither has an absolute advantage. However, Country A exports milk to Country B, and Country A imports cotton from Country B. Which of the following is inferred? (5 points)

-The opportunity cost of producing milk is lower for Country A.

-The opportunity cost of producing cotton is higher for Country B.

-Country A has a natural resource advantage in cotton.

-Country B has a natural resource advantage in milk.

Question 9: Worker hours to produce one unit of natural gas; Worker hours to produce one unit of oil; Brazil 4 9; Argentina 2 10; Mexico 3 7; United States 1 6. According to the chart, which country has the comparative advantage in oil production? (5 points)

-Brazil

-Mexico

-Argentina

-United States

Question 10: The United States can manufacture books at a much more rapid pace than manufacturers in Indonesia. Which of the following is a reason? (5 points)

-Indonesia, as a developed country, has a highly paid and experienced workforce

-Indonesia, as a developing country, has a less advanced manufacturing infrastructure

-The United States, as a developing country, has a high comparative advantage in manufacturing.

-The United States, as a developed country, has a lower cost of living than Indonesia

Question 11: A group of nations establishes a free-trade zone. What is the most likely effect? (5 points)

-Cost of trade increases

-Exports decrease

-Imports decrease

-Trade increases

Question 12: The United States may have a tariff on cotton products from China in order to (5 points)

-prevent Chinese manufacturers from losing profit because of low prices

-protect the business of the American cotton growers and manufacturers

-stop trade due to political disagreement on economic policy

-promote sales in the United States of cotton products from China

Question 13: A Chinese international salesperson hoping to increase exports to the U.S. may worry about the inflation of the U.S. dollar because the inflation may (5 points)

-increase the United States' supply of Chinese products

-decrease tariffs on Chinese products sold to the United States

-increase taxes on the United States' products sold to China

-reduce the United States' demand for Chinese products

Question 14: How would a strong U.S. dollar impact the trade of grain produced in the United States? (5 points)

-U.S. grain exports decrease

-U.S. grain exports increase

-U.S. grain imports decrease

-U.S. grain imports stagnate

Question 15: Which of these can be a result of inflation? (5 points)

-Businesses grow cautious about spending

-The government has to cut spending

-The price of household items increases

-Workers benefit from a lower cost of living

Question 16: If the inflation rate increases faster than their income, people will most likely (5 points)

-use a higher proportion of their incomes on basic needs

-spend a lower proportion of their incomes on basic needs

-get more goods and services for less money

-obtain fewer goods and services for less money

Question 17: To increase your standard of living, your wages must (5 points)

-rise faster than the inflation rate

-rise more slowly than the inflation rate

-keep pace with the inflation rate

-have a negative inflation rate

Question 18: Look at the map showing the European Union (EU) and its free-trade agreement (FTA) countries. Which is true about most current EU free-trade agreements? (5 points)

-The European Union's free-trade agreements are with all of the most developed nations in the world.

-The European Union's free-trade agreements include agreements with both developed and developing nations.

-The European Union's free-trade agreements focus on nations with access to overland trade routes

-The European Union's free-trade agreements focus on the Southern Hemisphere, as distant countries have access to goods not grown in Europe.

peachyellowjacket690

Need help revising, and recommendation for a conclusion.

Throughout this paper is my understanding of what I have learned in class chapters 1-4, expressing my understanding and opinions. Economics is the study of how we deal with scarce resources. Microeconomics specially deals with business in the home country exclusively. This type of economics affects small businesses in the home country only. On the other hand, macroeconomics concerns our national welfare concerning trade and international business.

I believe that many things affect our economy on a microeconomics level. Things such as our understanding of our country in reflection to the world are very important. That is why we study ourselves before we study the macroeconomic principle of the world. Understanding ourselves is what microeconomics teaches us. Working from the inside out. The world is a place where there are differences in our wants and what we get. That is what makes items scarce. That is what positive economics is. Positive economics deals with what is and what we have. The other type of economics is called normative statements. This deals with what we should receive instead of what is and deserved to some extent. It's our scarce resources that determine our allocation of resources and how we use our resources and time. This is where opportunity costs come in, giving up something to do something. A successful business or country never ignores opportunity costs. We must ensure that we have a comparative advantage instead of the absolute advantage. Our resources must be used to achieve maximum output. Comparative is met when we have fewer opportunity costs to make some certain products than the other person or entity.

My initial understanding was scarcity was oil potentially running out, but we have so much of it that you can always find more with techniques such as fracking. Now it's obvious to me, one of our most scarce resources is time. You cannot avoid the 8,760 hours in a year. I understand that people have unlimited wants but limited resources. Everything has a cost and we must make a choice as we don't have unlimited farms, factories workers, etc. scarcity forces choices and this ties in with opportunity cost, for every gun made, a theft from the hungry is made. The opportunity cost not being used to feed the poor, but to make guns. And I find it easy to understand no one can have everything choices must be made on benefits. If I'm going to school, imp giving up making cash, as I'm giving up money for an education, I value education more. Scarcity is also related to the invisible hand. As it's an achievement that leads free markets and capitalism through competition for scarce resources.

My understanding of the invisible hand is a person neither intends to promote public interest and does not know how much he is promoting it. Only intending on his own gain. Without being his intention a person can be lead by the invisible hand to do good for society by pursuing one's own self-interest. Going into equity and efficiency the invisible hand does ensure both equity and efficiency. People work in their selfish ways to maximize profit while also contributing to the economy as a whole. It can also be argued that as the invisible hand wants to ensure efficiency, it cannot guarantee efficiency, because it can fail to produce an efficient allocation of resources, which in turn lead to a market failure. It can also be argued that it can't guarantee equity because not everyone gets a fair price. The way I like to remember efficiency is with a real-life example, like a reduction in the number of workers needed to produce a particular good for a particular amount. Equity refers to the ownership interest in an asset, for example, if a person owns a house with a market value of $800,000 and owes $100,000 on the mortgage leaving a $700,000 equity in the home.

It can be predicted that if the price of beef increases - ceteris paribus-the quantity of beef demanded by buys will decrease. In other words, if the price of beef increases, then the quantity of beef increases, then the quantity of beef demanded will decrease because all things have to be equal. In-class lecture thought me all other things remaining the same. Economists use ceteris paribus to determine the effect of a factor when all other factors have been held the same and helps simplify the study and get a more refined data set.

Economists deal with many issues that pertain to assuring that both a countries domestic output is efficient and that there is an effective trade balance. This means that there are a balance and limit on the amount of imports. Also, this means home production must be able to meet export demands. There are many factors that affect the production of goods and their effect on shifting the production possibilities frontier. This involves evaluating every detail including knowing the products and any close substitutes and compliments. It also involves knowing how an action or other external force will affect demand. This is called price elasticity; Substitutes are products that can replace any given product or service. An example of this would be Coke and Pepsi. The presence of substitutes affects price elasticity because if there are other options, then any change to the price or quality of the product will cause a shift of the demand curve. O course, price is a huge reason why the demand for a product decreases or increases yet it doesn't shift the curve because of the price only. This price change will cause a domino effect that will end with the shifting of the demand curve because it will cause an increase or decrease in demand of the substitute good if the price change is either lower or higher respectively. This price change serves as a catalyst that will change people's desire to spend more money on a more expensive product and that will instead choose to buy the substitute good for cheaper or buy more of the desired product. The change in the price of actual products will not shift the demand curve yet the change of the price of substitutes will because it serves to change people's purchasing behavior. On the other hand, compliments serve to boost demand when there is a decrease in price. The use of complementary goods is dependent upon another product. An example of this would be hot dogs and buns. If the price of hotdogs decreases then, conversely, the demand for hot dog buns will increase because of this change in price. In this scenario, the decrease in price will cause a positive shift in the demand curve because of people's desire and willingness to buy more buns. This is an example of a demand shifter. There are a few other demand shifters. The shifters of the demand curve are changes in expectations, disposable income, price of substitute goods and complements, tastes and preferences, and population size and composition. Changes in income affect the demand curve because if income is lower then people tend to save any extra income instead of wasting it. Disposable income is minimized and spending is lower. This also causes people to see a perceived value of things and distinguishing between what is necessary and what is a relative luxury. The lower the income, the higher the saving and avoidance to spend. An example of this would be if someone needs to buy some medication and it is relatively expensive, that doesn't mean that someone won't buy the medication just because it is expensive. It is necessary. Other factors that contribute to spending and demand are having a price ceiling and price floor. Having a price ceiling is a limit on the price of the product this is a government-imposed idea that is meant to protect consumers from unfair pricing and other conditions that may be malicious or obscure. This affects demand because if there is a price ceiling there is a limit on profit on a unit-to-unit basis. The other factor is the price floor. This price floor was created to encourage competition and affect consumers' willingness to pay because sometimes this new price may be higher than the original price. This causes a negative impact on a product that has a less than wanted perceived value. Many factors contribute to economic prosperity and certainly do help assure that information is analyzed and implemented into an economic and business plan.

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ECON-UA 12 Lecture Notes - Comparative Advantage, Opportunity Cost, Phillips Curve

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