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ECO 215 QUIZ 3 & 4
Terms in this set (17)
Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts. Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts. The US should
export semiconductors to Mexico and import auto parts from Mexico.
Specialization and trade are closely linked to:
Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then
Jim has a comparative advantage in the production of baseball bats
Trade can make everybody better off because it:
allows people to specialize according to comparative advantage.
When describing the opportunity cost of two producers, economists use the term
A competitive market is a market in which:
no individual buyer or seller has any significant impact on the market price.
Suppose you make jewelry. If the price of gold falls, then we would expect you to:
be willing and able to produce more jewelry than before at each possible price
A surplus exists in a market if:
the current price is above its equilibrium price.
The forces that make market economies work are
supply and demand
A leftward shift of a supply curve is called a(n)
increase in quantity supplied
In a market economy, supply and demand are important because they
-play a critical role in the allocation of the economy's scarce resources.
- determine how much of each good gets produced.
-can be used to predict the impact on the economy of various events and policies.
When quantity demanded decreases at every possible price, the demand curve has
shifted to the left
A downward-sloping demand curve illustrates:
the law of demand
A demand schedule is a table that shows the relationship between
price and quantity demand
A competitive market is one in which there:
are so many buyers and so many sellers that each has a negligible impact on the price of the product.
If the demand for a product increases, then we would expect equilibrium price:
increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase.
An example of a perfectly competitive market would be the market for
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