Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink), and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant and drink is relatively labor-intensive. If the countries engage in free trade, the price of food will
A. fall in Alpha and rise in Beta.
B. fall in both countries.
C. rise in both countries.
D. rise in Alpha and fall in Beta.
Answer: A
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Define rent seeking. Is rent-seeking activity likely to be highly profitable in the long run? Why or why not?
What will be an ideal response?
You have won the lottery. There are two payment options for you. The first option is a lump sum payment of $10 million that you will receive immediately. The second option is an annual payment of $1 million for each of the next 12 years. Assume there is
no inflation. How would you make a decision between the two options? What will be an ideal response?
A decrease in the price of spaghetti is likely to cause:
A. an outward shift of the demand curve for spaghetti. B. a movement to the right along the demand curve for spaghetti. C. an inward shift of the demand curve for spaghetti. D. a movement to the left along the demand curve for spaghetti.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, Point F
A. is efficient and attainable. B. cannot be produced with the current state of technology. C. represents underallocation of resources. D. represents what the people want.