Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model has a comparative advantage in manufactured output. What is the effect on the return of land after trade occurs?
a. The return on land increases.
b. The return on land decreases.
c. The return on land does not change.
d. The effect cannot be determined.
Answer: b. The return on land decreases.
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From any point within the production possibilities frontier,
A) the only way to increase production of one good is to decrease production of the other. B) it is possible to increase both people's utility. C) it is possible to increase output of both goods. D) any move will necessarily decrease production of some good.
Which of the following does not appear in GDP as a part of government spending?
A. Clipboards at the Department of Motor Vehicles. B. Maintenance of government buildings. C. Social Security payments. D. City fireworks displays on the Fourth of July.
Which of the following factors would be most likely to encourage capital formation in a less-developed nation?
a. high and variable rates of inflation b. tariffs and quotas that restrict international trade c. a legal system that provides for secure property rights and even-handed enforcement of contracts d. high marginal tax rates
Below, the graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply.
If the firm's demand and marginal revenue curves were drawn in the left-hand graph, what would be the elasticity of demand?
A. -0.6 B. zero C. infinitely elastic D. -6 E. unitary