Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ________ and wages in the computer industry ________.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
Answer: D
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In the production possibilities frontier depicted in the figure above, what is the opportunity cost of increasing the production of bananas from two million pounds to three million pounds?
A) 1/2 hat per pound of bananas B) 1 hat per pound of bananas C) 2 hats per pound of bananas D) 3 hats per pound of bananas
Property law
a. helps to ensure that only voluntary exchanges occur b. tends to decrease the level of economic efficiency c. helps define ownership rights to resources d. establishes property taxes e. helps to distribute government property
Which of the following is true?
a. The best distribution of income can be determined objectively. b. The transfer of income from one group to another is costly; it will generally reduce total output. c. Positive economics can determine the variation in incomes that would be best for an economy. d. The fairness of an income distribution is determined by its pattern (the measured degree of income inequality). e. All of the above are true.
The theory of bounded rationality suggests that as price rises:
A. marginal utility will decline. B. MU/P may not decline. C. MU/P will always decline. D. the opportunity cost of the good will decline.