What are the advantages and disadvantages of resource allocation under monopolistic competition compared to perfect competition?
What will be an ideal response?
The disadvantage is that monopolistically competitive firms do not operate at minimum long-run average cost, whereas competitive firms do. The advantage is that “variety is the spice of life” and there is variety in monopolistic competition but not in perfect competition, where all producers make an identical product.
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In the Solow model, if saving per worker initially exceeds investment per worker,
A) the economy will experience inflation. B) the capital—labor ratio will increase. C) investment per worker will decline. D) saving per worker will decline.
Refer to Scenario 10.5. How many garden hoses should be produced in California in order to maximize profits?
A) 1 B) 2 C) 3 D) 4 E) 5
Real GDP per person
a. minus real GDP per person from the previous period equals the growth rate of real GDP per person. b. provides more meaningful comparisons across time and countries than real GDP. c. provides a less useful measure of the standard of living than nominal GDP per person. d. All of the above are correct.
You are the Minister of Trade for a small island country with the following annual PPC:
You are negotiating a trade agreement with a neighboring island with the following annual PPC: 
If you offer to give the other island 1 coconut for every 4 fish they give you, then they will:
A. refuse your offer because they have a comparative advantage in fish. B. accept your offer because their opportunity cost of a coconut is greater than 4 fish. C. accept your offer because your opportunity cost of a coconuts is less than 4 fish. D. refuse your offer because they can produce as many coconuts as you can.