The fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that
A. a nation can consume more than it can produce only by going into debt.
B. only one of two nations engaged in trade can consume more than it produces.
C. both of two nations can consume more than they produce if they engage in trade.
D. the production possibilities frontiers of any two nations are identical.
Answer: C
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Assuming the existence of economies of scale, if a firm finds that it can reduce its unit cost by decreasing its scale of production, it means that
A) it has too much production capacity relative to its demand. B) it should try to produce less. C) the law of diminishing returns has not taken effect. D) it has too much fixed overhead relative to its variable cost.
An increase in demand and an increase in supply will lead to
A) unambiguous increases in both price and quantity. B) unambiguous decreases in both price and quantity. C) an unambiguous increase in quantity, but the effect on price is indeterminate. D) an unambiguous increase in price, but the effect on quantity is indeterminate.
Changes in expectations about future price levels:
A. affect only the short-run aggregate supply curve. B. affect only the long-run aggregate supply curve. C. affect both the long-run aggregate supply curve and the short-run aggregate supply curve. D. do not affect either the long-run aggregate supply or the short-run aggregate supply curve.
Economics is different from a "hard" science like physics because: a. economists abstract from reality in creating their theories
b. economics is easier to study than physics. c. economists must explain their theories to policy makers who lack formal mathematical training. d. economists cannot easily control all the variables that might influence human behavior.