Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
a. Brazil has an absolute advantage in producing only coffee.
b. Brazil has an absolute advantage in producing only sugar.
c. Chile has an absolute advantage in the production of both coffee and sugar.
d. Chile has an absolute advantage in producing only coffee.
e. Brazil has an absolute advantage in the production of both coffee and sugar.
c
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If purchasing power parity holds between the U.S. and China:
A. the real exchange rate must be 1. B. the nominal exchange rate must be 1. C. the U.S. must no longer have a trade deficit. D. China must no longer have a trade deficit.
In a winner-take-all system, the highest incomes go to people with questionable skills, but who are the most competitive in the labor market
Indicate whether the statement is true or false
Which of the following would be the most likely long-run effect if the United States increased its tariff rates and adopted stricter import quotas?
a. a decrease in both U.S. imports and exports b. an increase in both U.S. imports and exports c. a decrease in U.S. imports and an increase in U.S. exports d. an increase in U.S. imports and a decrease in U.S. exports
Refer to the above figure. Which of the following statements about panel D in the figure is TRUE?
A. The figure is in error since it has marginal cost intersecting the ATC curve at a point other than the minimum of ATC. B. The figure is in error since it doesn't show the monopolistic competitor making profits in the long run. C. The figure represents a long-run equilibrium for a monopolistic competitor. D. The figure represents an industry long-run equilibrium for monopolistic competition.