In 1980, in order to stimulate agricultural production, Fidel Castro allowed Cuban farmers to sell their goods directly to consumers and keep whatever profit they made. Some farmers were earning $50,000 per year, compared with the average worker income of $2,400. The workers resented this. Castro denounced the farmers as “capitalist gangsters” and closed the free markets. Cuban cash income declined 5 percent and fresh vegetables were in short supply. This illustrates the economic concept of the
A. law of comparative advantage.
B. equality-efficiency trade-off.
C. cost disease of the service sector.
D. unemployment-inflation trade-off.
E. All of these responses are correct.
Answer: B
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Which of the following is an implicit cost in Jim's business venture?
i. the salary Jim could have earned at another job ii. the interest Jim must pay on the loan he incurred to help open his business iii. the interest Jim lost when he used his savings to help open his business A) i only B) ii only C) iii only D) i and iii E) ii and iii
Refer to the graph shown. To maximize profit, this firm should produce:
A. 250 units of output. B. 525 units of output. C. 450 units of output. D. 120 units of output.
A technological advance that increases labor productivity will:
A. decrease the demand for labor as MP falls. B. decrease the demand for labor as fewer workers are needed. C. decrease the supply of labor as fewer workers are needed. D. increase the demand for labor as MP rises.
You value your economics textbook at $40. Someone else values it at $30, but that person is willing to pay you $35 for your textbook. Would selling your textbook to this person for $35 be Pareto efficient?
A. Yes, because you received the maximum amount the other person would have been willing to pay for the textbook. B. Yes, because both of you are better off as a result of the trade. C. Yes, the person paid you $35 for the book so his net benefit was -$5, whereas your net benefit was also -$5. This exchange is Pareto efficient because each of you have the same net benefit. D. No, because even though he was willing to pay more for the book than he valued it at, you would not receive as much as you value it at, so you would be made worse off.