Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rSuppose Country A engages in free trade and the price of cloth increases to $4 per unit. However, the price of wheat remains unchanged. Under such a situation, the Stolper-Samuelson theorem will predict that
A. the purchasing power of both the landowners and the laborers will increase.
B. the purchasing power of the laborers will increase but that of the landowners will decline.
C. the real income of both the landowners and the laborers will decline.
D. the real income of the landowners will increase but that of the laborers will remain unchanged.
Answer: B
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Suppose real money demand is 1000, real output is 6000, and the price level is 200. What is the level of velocity in this economy?
A) 2 B) 3 C) 6 D) 12
Refer to the scenario above. Which of the following will be true if the service center has a reputation of trustworthiness?
A) The equilibrium outcome will be equitable. B) A unique equilibrium will not occur. C) Multiple equilibria will occur. D) The equilibrium outcome will be socially efficient.
Which of the following would not bar entry into a market?
a. control by a single firm of an essential resource b. the necessity of taking risks when starting a firm c. patents d. economies of scale e. government regulations limiting the number of firms in an industry
If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that
A) the amount of cheating will be unaffected. B) any of the above is possible because student behavior is unpredictable. C) fewer students will attempt to cheat. D) cheating will be completely eliminated.