Which of the following observations is true of the principle of comparative advantage?
A. It arises from the absolute cost advantage.
B. It helps determine most efficient patterns of production.
C. It was advanced by Adam Smith.
D. It means producing a good using smaller quantities of resources than others.
Answer: B
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Which of the following cannot be classified as a market structure?
a. Oligopoly b. Monopolistic Competition c. Mergers d. Perfect Competition
Gross domestic product (GDP) is a poor measure of social well-being because:
a. the value of leisure time is included in GDP accounting. b. the revenue earned through exports is ignored c. each dollar of government spending is valued at less than one-half of private spending. d. consumer spending is more important than business spending and should be considered more valuable. e. it values products at their market prices but ignores services produced.
One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?
(Appendix) In the production function Q = 10L1/2K1/2 calculate the marginal product equations of both inputs.
What will be an ideal response?