Suppose that at first the price of a bag of coffee is ?$15 and the price of a box of tea is ?$9. ?Then, the price of a bag of coffee changes to ?$30 and the price of a box of tea changes to ?$21. What has happened the money prices and relative prices of these two? goods?
What will be an ideal response?
Answer: The money price of a bag of coffee and a box of tea have risen and the relative price of a bag of coffee has fallen while relative price of a box of tea has risen.
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
According to the above figure for a gasoline market, at a price of $1 per gallon of gasoline, there would be
A) a shortage of 30 million gallons. B) a surplus of 30 million gallons. C) a shortage of 20 million gallons. D) a surplus of 50 million gallons.
A bottle of wine can be produced in France with two labor hours, and in the United States with four labor hours. A pound of beef can be produced in France with one labor hour, and in the United States with ½ labor hours. Given this context, which of the following is true?
A. The United States has both a comparative and absolute advantage in the production of beef. B. France has a comparative advantage in the production of beef. C. The United States has an absolute but not a comparative advantage in the production of beef. D. France has an absolute advantage in the production of beef.
The figure below represents the effects in the labor markets due to migration. Here, the world has been divided into a high-income "North" (left panel) and a low-income "South" (right panel). Dn and Sn are the labor demand and the labor supply curves in North. Ds and (Sr + Smig) are the labor demand and pre-migration labor supply curves in South. Sr is the post-migration labor supply curve in South. The value c is the cost of migrating.
The net gain to the migrants is represented by the area
A. (a + f). B. (e + f). C. (d + e). D. (a + b).