The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is $50 as Ed's opportunity cost of selling is $135 and Luis' valuation of the good is $185 . Suppose Ed and Luis do not speak the same language and Ed hires an interpreter who charges $2 per hour. Ed and Luis finally agree to a price of $160 . This implies:
a. Luis' valuation of the good will increase.
b. Ed's opportunity cost will decline.
c. economic value from the transaction will decline.
d. Ed will receive to a lower benefit than Luis.
D
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In scientific language, a theory is an untested assertion of alleged fact.
Answer the following statement true (T) or false (F)
Which of the following conclusions is not supported by the Three-Sector-Model?
a. A decrease in borrowing causes the real risk-free interest rate to fall and equilibrium quantity of real loanable funds to fall. b. An increase in the supply of a nation's real loanable funds reduces the real risk-free interest rate and increases the equilibrium quantity of real loanable funds. c. An increase in a nation's demand for goods and services within the intermediate range results in an increase in the real GDP and a higher GDP Price Index. d. An increase in the value of a nation's currency encourages domestic exports and discourages imports. e. All of the above are supported by the Three-Sector Model.
When aggregate demand shifts rightward along the short-run aggregate-supply curve, inflation
a. increases and unemployment increases. b. increases and unemployment decreases. c. decreases and unemployment increases. d. decreases and unemployment decreases.
A nation has a comparative advantage over a trading partner in the production of good A if it
A. produces good A at a lower opportunity cost per unit than its trading partner. B. can produce good A with the same resources as its trading partner but in less time. C. can match its trading partner's output of good A and have resources left over. D. has an absolute advantage over its trading partner.