Explain whether it is possible for a country to have an absolute advantage in the production of a product without having a comparative advantage in the production of that product
What will be an ideal response?
A country can have an absolute advantage without having a comparative advantage in the production of a product, because having an absolute advantage means a country can produce more of the product than another country while using the same amount of resources, and having a comparative advantage means that the country can produce the product at a lower opportunity cost than another country. Having a comparative advantage is not required to have an absolute advantage.
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Suppose a new Dunkin' Donuts shop has opened in town. Its main competitor, Doughnut Delite, will likely
a. begin to produce more doughnuts. b. experience higher marginal costs. c. reduce its prices and production. d. make no changes in its pricing and production decisions.
The potential output of an economy is the level of output produced when the
a. real wage equals the nominal wage. b. price level is constant. c. expected real wage equals the inflation rate. d. expected price level equals the unemployment rate. e. expected price level equals the actual price level.
What are the types of market power? How do they arise?
What will be an ideal response?
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and the nominal value of the domestic currency in the context of the Three-Sector-Model? a. The GDP Price Index
rises and nominal value of the domestic currency remains the same. b. The GDP Price Index falls and nominal value of the domestic currency remains the same. c. The GDP Price Index and nominal value of the domestic currency remain the same. d. The GDP Price Index falls and nominal value of the domestic currency falls. e. There is not enough information to determine what happens to these two macroeconomic variables.