Assume that initially country A exchanges three barrels of oil for one ton of steel from country B. Later the arrangement changes to four barrels of oil for one ton of steel. This indicates that:
a. the terms of trade for country B have improved.
b. country A has a comparative advantage in the production of steel.
c. the relative price of steel in terms of oil has fallen.
d. the terms of trade for country A have improved.
e. country B has an absolute advantage in the production of oil.
a
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Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is TRUE?
A) The relative price of stoves and refrigerators has not changed. B) The relative price of a refrigerator has increased. C) The relative price of a stove has increased. D) The money price of a refrigerator has fallen.
In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price
A) corresponding to the demand curve where marginal revenue equals zero. B) equal to average variable cost where it intersects the demand curve. C) equal to average total cost where it intersects the demand curve. D) equal to marginal cost where it intersects the demand curve.
In a perfectly competitive market, a technological advance allows all firms to earn higher economic profits in the long run
a. True. b. False.
If an economy produces only steel and wheat, a new fertilizer will
A) cause the production of wheat to increase at every point on a production possibilities curve but not affect the production of steel, that is the curve moves outward on the wheat axis only. B) cause the production of both wheat and steel to increase at every point along the production possibilities curve, that is the curve moves outward on both the wheat axis and the steel axis. C) not affect the production of either wheat or steel. D) cause the production of steel to increase at every point along the production possibilities curve but not affect the production of wheat, that is the curve moves outward on the steel axis only.