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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?

Short Answer

Expert verified

The opportunity cost is the lost marginal product of labor and efficiency.

Step by step solution

01

Explanation 

Opportunity cost is the benefit foregone due to choosing one strategy against an alternate strategy.

When labor is used as an input to produce goods and services, each additional laborer adds something to the output production, which is their marginal product. When a worker is roaming around from task to task or searching for production tools, they cannot use the time to produce the good. Although the marginal cost is still there, there is a loss in marginal product. This bears an opportunity cost leading to inefficiency in production.

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Most popular questions from this chapter

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.

Before lean manufacturing innovations, Japan mostly sold consumer electronics to the United States. How did lean manufacturing innovations alter Japan’s comparative advantage vis-à-vis the United States?

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.

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?

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?
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