Consumer Goods, Absolute Advantage, Produce, Principles of Macroeconomics Homework
The key terms in this Principles of Macroeconomics course include Capital Goods, Consumer Goods, Economy, Absolute Advantage, Produce, Principles of Macroeconomics Homework
Austin, Jensen, Matthew, and Walker can all produce matches, brushes, cans, and shirts. The table below identifies how many of each good they can make in a day if they devote themselves to producing only that good.
Who has the absolute advantage in producing brushes?
The person with the absolute advantage is the one who can produce the most output. In this case, Walker can produce more brushes than anyone else, so he has the absolute advantage.
Examine the two figures below. Which of these figures will experience a higher long-run growth rate, assuming their ratio of consumer goods to capital goods produced is constant over time?
Economy A, because it produces more consumer goods relative to capital goods.
Economy B, because it produces more capital goods relative to consumer goods.
Economy B, because its ratio of consumer goods to capital goods produced is higher than Economy A’s ratio of consumer goods to capital goods produced.
It is not possible to tell from the information in the figures.
Societies that invest a relatively larger percentage of their production into capital goods, which are a type of investment in future production, experience higher growth rates. The economy in Figure A produces more C goods than capital goods while the economy in Figure B produces an equal proportion of consumer goods and capital goods. So, the ratio of capital to consumer goods produced is higher in economy B, and consequently economy B’s growth rate will be higher.
Which of the following would lead to the situation shown in the figure above?
a reduction in the retirement age
a reduction in skills for workers who produce pizza and workers who produce wings
an improvement in technology for production of both pizza and wings
an earthquake in the country
With improvement in technology it is possible to produce more of both goods while using the same amount of labor. This will allow the PPF to expand outward. An earthquake would destroy resources and cause the PPF to shrink inward. A reduction in retirement age would lower the size of the labor force, lower production, and cause the PPF to shrink inward. A reduction in worker skills would decrease the human capital available, decreasing production for workers and causing the PPF to shrink inward.