Assume a two-country, two-commodity, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW (K/L)automobiles > (K/L)shoes(K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in the production of shoes.Assume further that technology and tastes are the same in the United States and the Rest of the World. Which of the following statements is true?
A. Production of shoes is relatively cheaper in the United States than the Rest of the World.
B. The laborers in the United States are less productive than the laborers in the Rest of the World.
C. Production of automobiles is relatively labor-intensive.
D. Production of shoes is relatively labor-intensive.
Answer: D
You might also like to view...
The market price for wallets is $20 . Your technology is such that at your most efficient production point, the average total cost of producing a wallet is $2.50 . Your manager runs into your office and shouts, "Boss! Average costs are rising! Average costs are rising!" To make a profit-maximizing decision, you should:
a. d or e. b. immediately stop production. c. completely ignore your manager. d. ask the manager about the marginal cost. e. ask the manager about the average total cost.
Commitment devices can be:
A. a tool to help people avoid temptation. B. an informal arrangement. C. formal policies set up through an employer or third party. D. All of these statements are true.
The substantial risks taken by financial intermediaries like Sallie Mae because they are effectively insured are examples of what economists refer to as: a. sub-prime behavior
b. asymmetric information. c. moral hazard. d. countercyclical policy.
A $100 billion decrease in government purchases would:
a. increase AD by $500 billion if MPC = 0.8. b. decrease AD by $300 billion if MPC = 2/3. c. increase AD by $200 billion if MPC = 0.5. d. decrease AD by $40 billion if MPC = 0.4.