Amy can produce either 5000 pounds of cheese or 20 cars per year. Mike can produce either 5000 pounds of cheese or 10 cars per year. If both Amy and Mike produce the good in which they have comparative advantage, the total annual output of this economy will be ________.
A. 10,000 pounds of cheese and 30 cars
B. 10,000 pounds of cheese
C. 5,000 pounds of cheese and 20 cars
D. 30 cars
Answer: C
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A) both face perfectly elastic demand. B) both make an economic profit in the long run. C) both have MR curves that lie below their demand curves. D) both make zero economic profit in the long run.
In the New Keynesian open economy model
A) the nominal exchange rate is always fixed. B) prices are flexible. C) net exports depends on the relative price of foreign goods to domestic goods. D) the nominal exchange rate is always flexible.
Keynesian economists believe that changes in GDP result primarily from changes in
a. aggregate supply and aggregate demand, both contributing equally b. aggregate supply c. aggregate demand d. monetary policy e. fiscal policy
Distinguish between the market wage and the marginal wage. Why is the marginal wage significant to an employer and to a labor union?
What will be an ideal response?