Why do we observe the Leontief paradox?
What will be an ideal response?
There are many possible answers. They may be classified into three groups. One would argue that the model, or theory is wrong. The second would argue that the theory is correct (internally consistent and descriptive of real world data), but the real world data is incorrectly perceived, defined or measured. The third would argue that the statement itself is wrong, and that in fact the Leontief paradox itself is not actually observed, but rather is due to faulty logical rendering of the original model. Empirical studies conducted since Leontief's work was published suggest that, by relaxing the model's restrictive assumptions regarding technology, goods, and trade costs, evidence in support of the HO model was strengthened and evidence of the Leontief effect was diminished.
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The demand curve facing the monopolist is
A) the same as the market demand curve. B) more elastic than the market demand curve. C) less elastic than the market demand curve. D) upward sloping.
Suppose that the country of Utopia produces only steel and coffee. In 1998, Utopia produced 900 tons of steel and 500 pounds of coffee, while in 1999, it produced 1,000 tons of steel and 550 pounds of coffee. Assume that no technological changes occurred in the production of either good and the resource endowment of Utopia did not change. Which of the following is true?
a. Utopia's opportunity cost of producing additional steel is 50 pounds of coffee. b. Utopia's production must have been productively inefficient in 1998. c. Utopia's opportunity cost of producing additional steel is 1/2 pound of coffee per ton of steel. d. Utopia's opportunity cost of producing additional coffee is 100 tons of steel. e. The production point in 1998 was unattainable given then-current resources and technology.
Consumer surplus is
a. a concept that helps us make normative statements about the desirability of market outcomes. b. represented on a graph by the area below the demand curve and above the price. c. a good measure of economic welfare if buyers' preferences are the primary concern. d. all of the above are correct.
According to Keynesians
A. an increase in aggregate demand will always lead to inflation. B. an increase in aggregate demand will eventually lead to deflation. C. an increase in aggregate demand will eventually lead to less real GDP. D. Insufficient aggregate demand could keep an economy in a depression for an extended period of time.