The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:
A. Tariffs are eliminated
B. Transportation costs are almost zero
C. Relative costs of production differ between nations
D. A country can produce more of some product than other nations can
C. Relative costs of production differ between nations
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Mrs. Smith operates a business in a competitive market. The current market price is $8.10 . At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25 . Mrs. Smith should
a. shut down her business in the short run but continue to operate in the long run. b. continue to operate in the short run but shut down in the long run. c. continue to operate in both the short run and long run. d. shut down in both the short run and long run.
If two goods are substitutes, then
A) an increase in the price of one causes the demand for the other to fall. B) there is an inverse relationship between changes in the price of one good and changes in the demand for the other. C) if the price of one good falls, the demand for the other good falls also. D) changes in the quantity demanded of one good will not affect the demand for the other.
The voluntary export restraints on autos by Japan in the early 1980s were:
A. unlike a tariff and did not affect the price of imports. B. prohibited by the WTO. C. a bad deal for the U.S. consumers. D. unlike an import quota and did not affect the price of cars imported.
The nominal interest rate is 7 percent and the expected inflation rate is 4 percent. The real interest rate is:
A) 10 percent. B) -2 percent. C) 3 percent. D) 4 percent.