If Country A has a higher ratio of labor to land than Country B, it can be inferred that
A. Country B is a relatively labor-abundant country.
B. Country A is a relatively labor-scarce country.
C. Country A can produce labor-intensive goods at lower costs than Country B.
D. Country B can produce labor-intensive goods at lower costs than Country A.
Answer: C
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An attempt by a central bank to alter the money supply by buying or selling domestic assets
A) will leave both domestic money supply and foreign reserves unchanged. B) will cause an offsetting change in aggregate demand. C) will lead to a rise in domestic employment and output. D) will lead to a decrease in domestic employment and output. E) will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.
Suppose equilibrium income in an economy decreases by $600 as a result of a change in government spending. If the multiplier is 3, what is the change in government spending?
a. Government spending will decrease by $1,800. b. Government spending will decrease by $600. c. Government spending will decrease by $200. d. Government spending will increase by $400. e. Government spending will increase by $1,200.
The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could
a. allow individual shepherds to choose their own flock sizes. b. internalize the externality by subsidizing the production of sheep's wool. c. auction off a limited number of sheep-grazing permits. d. wait until the market corrects the problem.
In the prosperity phase of the business cycle, aggregate demand increased raising the price level and employment. But later, in the aftermath of the prosperity phase, aggregate demand slackened so that the price level and employment fell. People who lost their jobs during this phase are considered to be part of the economy's
a. cyclical unemployment b. structural unemployment c. permanent unemployment d. frictional unemployment e. underemployment