If the opportunity cost of 1 wristwatch is 4 wall clocks in Japan and 2 wall clocks in Germany, it makes sense for Japan to produce wristwatches
Indicate whether the statement is true or false
FALSE
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Use the following graph, where Sd and Dd are the domestic supply and demand curves for a product, to answer the next question.
Suppose the world price of the product is $6. If this market is closed to international trade the total revenue that would go to domestic producers would be ________, and if the market is open to international trade the total revenue for domestic producers would be______.
A. $500; $240 B. $600; $240 C. $600; $120 D. $240; $120
Starting from an initial long-run equilibrium, under the adaptive expectations hypothesis, a shift to a more expansionary policy will increase
a. prices and unemployment in the long run. b. real output in the short run but not in the long run. c. real output in the long run but not in the short run. d. real output in both the long run and the short run.
Refer to the graph below, which shows the market for beef where demand shifted from D1 and D2. The change in equilibrium from E1 to E2 cannot be a result of:
A. Buyers expectations of lower prices for beef in the very near future
B. An increase in the subsidy given to cattle farms
C. A widespread concern about mad-cow disease
D. A decrease in the productivity of cattle farms
Suppose that, recognizing that an efficient market outcome may not me equitable, a central planner announces that each agent's net benefit (the difference between the reservation value and the price paid) beyond a certain amount will be taken away and redistributed to other agents whose new benefit is below the specified level. This policy is expected to produce ___________
A) an efficient outcome where every agent has the same net benefit B) an efficient outcome where every agent has 0 net benefit C) an inefficient outcome where no trade will occur D) an inefficient outcome where trades will occur at the higher price than at the equilibrium