Which of the following is TRUE with respect to specialization?
A) Adam Smith in The Wealth of Nations referred to specialization and division of labor.
B) With a given set of resources, specialization results in higher output.
C) Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization.
D) All of the above are correct.
Answer: D
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Indicate whether the statement is true or false
A car that is produced in 2016 is not sold until 2017. According to the definition of GDP, in which year's GDP should it be counted?
A) Half of the sales price will count as part of 2016 GDP and half will count as part of 2017 GDP. B) The production cost will count as part of 2016 GDP while the sales price will count as part of 2017 GDP. C) 2017 D) 2016
The tradeoffs faced by a society can be illustrated in a graph known as the:
a. production operations curve. b. production cost curve. c. production cost model. d. production cost forecast curve. e. production possibilities curve.
The owner of Tie-Dyed T-shirts, a perfectly competitive firm, has hired you to give him some economic advice. He has told you that the market price for his shirts is $20 and that he is currently producing 200 shirts at an AVC of $15 and an ATC of $25. What would you recommend to him?
A. To shut down in the short run, as he is incurring a loss, and to leave the industry in the long run, if there are no changes in economic conditions. B. To continue producing in the short run, as his loss from production is less than his fixed costs, but to exit the industry in the long run if there are no changes in economic conditions. C. To continue to produce in the short run, even though he is earning a loss, and to expand in the future with the hope of increasing market share and total revenue. D. You tell him you cannot make any recommendations until you know what his fixed costs are.