Which of the following statements is CORRECT?
a. The HO model assumes that all resources can freely move between industries.
b. The specificfactors model assumes that all resources can freely move between industries.
c. Both the HO and the specificfactor models assume that all resources can freely move between industries.
d. Neither the HO nor the specificfactor model assumes that all resources can freely move between industries.
Answer: a. The HO model assumes that all resources can freely move between industries.
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Assume the tennis ball industry, a perfectly competitive, increasing?cost industry, is in long-run equilibrium with a market price of $5. If the demand for tennis balls decreases, long-run equilibrium will be reestablished at a price
A. equal to $5. B. less than $5. C. greater than $5. D. either greater than or less than $5, depending on the number of firms that enter the industry.
According to classical macroeconomic theory,
a. the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process. b. for any given level of output, the interest rate adjusts to balance the supply of, and demand for, money. c. output is determined by the supplies of capital and labor and the available production technology. d. All of the above are correct.
The Wax Works sells 400 candles at a price of $6 per candle. The Wax Works' total costs for producing 400 candles are $2,500. The Wax Works' economic profit is
A. -$100. B. $0. C. $2,400. D. $2,500.
The "Money Tower of Babel" mentioned in the text refers to
a. the fact that there is too much money floating on the foreign exchange market b. the fact that countries have their own currencies c. the multiple exchange rates for each currency d. the foreign currencies used to strengthen economies e. too much money servicing international trade creates international inflation