People are willing to pay more for a diamond than for a bottle of water because
a. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
b. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
c. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.
d. water prices are held artificially low by governments, since water is necessary for life.
B
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Explain the impact for producers, consumers, and the government of a tariff imposed on imported lumber.
What will be an ideal response?
Which of the following decisions is the best example of a business engaging in marginal thinking?
a. choosing whether or not to manufacture an entirely new product line b. deciding to discontinue using newspaper advertising completely c. evaluating whether it would increase profits to add a second shift at their factory d. identifying the opportunity that will be lost when a certain action is taken
Why are international investors who have invested in developing nations favoring foreign direct investment and portfolio investment over loans?
A. It is illegal for banks to make loans to foreign firms. B. The process of making loans is usually more difficult for investors to do than foreign direct and portfolio investment. C. Investors have an aversion to owning dead capital and want to make sure that the resources they own do not become dead capital. D. The interest rate charged on the loans is usually lower than what can be earned in the U.S.
Refer to Table 7-5
a. Which person has an absolute advantage in the production of pens? Pencils? b. Which person has a comparative advantage in the production of pens? c. Which person has a comparative advantage in the production of pencils?