Chapter 2: Q1. (page 104)
What is the opportunity cost associated with having a worker wander across the factory floor from task to task or in search of tools and parts?
The opportunity cost is the lost marginal product of labor and efficiency.
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How do you think the shift in the location of Toyota's production from Japan to the United States has altered the pattern of comparative advantage in automaking between the two countries?
Use the circular-flow diagram to explain how an increase in the amount of money spent by households results in an increase in the number of jobs in the economy. Describe in words what the circular-flow diagram predicts.
True or false? Explain your answer.
a. Policy choice A and policy choice B attempt to achieve the same social goal. Policy choice A, however, results in a much less efficient use of resources than policy choice B. Therefore, economists are more likely to agree on choosing policy choice B.
b. When two economists disagree on the desirability of a policy, it’s typically because one of them has made a mistake.
In Italy, an automobile can be produced by 8 workers in one day and a washing machine by 3 workers in one day. In the United States, an automobile can be produced by 6 workers in one day and a washing machine by 2 workers in one day.
a. Which country has an absolute advantage in the production of automobiles? In washing machines?
b. Which country has a comparative advantage in the production of washing machines? In automobiles?
c. What pattern of specialization results in the greatest gains from trade between the two countries?
Explain how lean manufacturing improves the economy’s efficiency in allocation.
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