Question 1

Why is the concept of ceteris paribus important for model building?

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Question 2

Explain how trading of goods creates value without creating any new goods.

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Question 3

Even though person A has an absolute advantage over person B both at producing good X and at producing good Y,it can still make sense for persons A and B to engage in trade involving goods X and Y.Explain why this is so.

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Question 4

When it comes to making ceramic plates and cups,Reza has a comparative advantage over Greta.When it comes to making knives,forks,and spoons,Greta has a comparative advantage over Reza.If Reza and Greta plan to engage in trade for mutual gain,does the concept of opportunity cost enable them to determine exactly what trading ratio of place settings to silverware sets they should use? Why or why not?

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Question 5

The table below shows the maximum number of burgers or hot dogs that Frances and Takeru can cook in one hour.
a.Fill in the rest of the table with the opportunity cost of burgers and hot dogs for each person.Be sure to include the units.
b.Identify who has a comparative advantage in producing each good.

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The answer of The table below shows the maximum number...

Question 6

Physicists can conduct experiments to study subatomic particles,even though no one has ever seen or photographed a subatomic particle.Experimental psychologists can study emotions,even though no one has ever seen or photographed an emotion.How can there be experiments in these areas of study? What are the implications for the science of economics?

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Question 7

When economists use models to make predictions,faulty assumptions can have disastrous consequences.Why is "avoid making assumptions" not the solution to this problem? Use the concepts of endogenous and exogenous factors to explain.

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Question 8

Explain why,in the figure,a country might rather be at point B than at point A.

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Question 9

Why doesn't our society invest more resources into the production of capital goods to enhance the level of growth in our future production possibilities frontier (PPF)?

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Question 10

Why might Shaquille O'Neal,a 7'1" former National Basketball Association (NBA)player,hire professional movers to help him move,even though his size and strength likely make him more proficient (better)at furniture moving than the professionals he may hire?

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Question 11

Explain why,ultimately,the opportunity cost of producing consumer goods instead of capital goods must be defined in terms of consumer goods.

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Question 12

Is it always better to forgo current consumption in order to invest more in capital goods that will provide more growth in society's production possibilities frontier (PPF)and make us better off in the future?

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Question 13

The existing entries in the following table show the maximum quantities of milk shakes or fruit smoothies the college president and dining hall staffer could make during an afternoon shift,given a fixed amount of resources.
a.Fill in the remaining part of the table (be sure to label the units)and answer the questions
below.
  
b.Who has a comparative advantage in producing smoothies?
c.Who has an absolute advantage in producing milk shakes?

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The answer of The existing entries in the following table...

Question 14

In the movie A Knight's Tale,three peasants win a jousting tournament and must decide whether they should enjoy most of their winnings now or use most of it for training to improve their future jousting performances.Use appropriate production possibilities frontiers (PPFs)and words to describe the investment trade-off they face.

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Quiz 2: Model Building and Gains From Trade