Chapter 2: Q2. (page 104)
Explain how lean manufacturing improves the economy’s efficiency in allocation.
Lean manufacturing improves the economy’s efficiency by reducing inventory costs and maximizing productivity.
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Using the numbers from Table 2-1, explain why the United States and Brazil are willing to engage in a trade of 10 large jets for 15 small jets.
TABLE 2-1 U.S. and Brazilian Opportunity Costs of Small Jets and Large Jets | ||
U.S. Opportunity Cost | Brazilian Opportunity Cost | |
1 small jet | ¾ large jet > | 1/3 large jet |
1 large jet | 4/3 small jets < | 3 small jets |
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?
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?
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?
True or false? Explain your answer.
a. An increase in the amount of resources available to Boeing for use in producing Dreamliners and small jets does not change its production possibility frontier.
b. A technological change that allows Boeing to build more small jets for any amount of Dreamliners built results in a change in its production possibility frontier.
c. The production possibility frontier is useful because it illustrates how much of one good an economy must give up to get more of another good regardless of whether resources are being used efficiently.
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