Suppose that Greece and Portugal are both engaged in the production of grapes and figs, and that Greece has an absolute advantage in the production of both goods. If Portugal has a lower opportunity cost for producing figs, then
A. Portugal has a comparative advantage in fig production, but there will be no gains from specialization and trade.
B. Portugal has a comparative advantage in the production of figs, and specialization and trade between the two countries can be mutually beneficial.
C. Portugal has a comparative advantage in the production of figs, but it is outweighed by Portugal's absolute advantage in fig production.
D. Greece has a comparative advantage in the production of both goods.
Answer: B
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Sugar price supports ensure an abundance of sugar, and hence reasonable prices for consumers.
Answer the following statement true (T) or false (F)
If the expected price level increases at the same time that the federal government cuts taxes, in the short run
A) aggregate output and the price level will both increase. B) aggregate output will increase, but the price level will fall. C) aggregate output and the price level will both fall. D) the price level will increase, but aggregate output may either increase or decrease.
The existence of an externality is proof that there is a(n):
a. market failure. b. undervaluation of a good. c. undervaluation of a cost. d. property dispute. e. free-rider problem
Which statement is true?
A. Price is calculated by dividing output by total revenue. B. The lowest point on the short-run supply curve is at the break-even point. C. When price exceeds marginal cost, a profit-maximizing firm will decrease production. D. The marginal cost curve intersects the average total cost curve at the break-even point.