How nations benefit from trade?
When nations are able to specialize and trade with each other, they are able to expand their PPF curve, essentially producing beyond what their resources alone are able to produce.
Absolute advantage - when a nation can produce more of something than another nation.
Comparative advantage - when a nation can produce something at a lower cost than another nation - the opportunity cost of production is lower than other nations.
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Over the past year, productivity grew 1%, capital grew 2%, and labor grew 2%. If the elasticities of output with respect to capital and labor are 0.3 and 0.7, respectively, how much did output grow?
A) 1% B) 2% C) 3% D) 4%
If the Consumer Price Index was 102.2 in 2007 and 104.9 in 2008, we can conclude that
a. the prices of all consumer goods were higher in 2008 than in 2007 b. the prices of all consumer goods were lower in 2008 than in 2007 c. the price level fell from 2007 to 2008 d. the price level rose from 2007 to 2008 e. the base year was 2001
Which of the following statements best describes the potential gains from trade?
a. The potential for gains from trade may be especially low among the smaller and lower income countries of the world. b. The potential for gains from trade may be especially high among the smaller and lower income countries of the world. c. The potential for gains from trade may be especially high among the medium and larger income countries of the world. d. The potential for gains from trade may be especially high among the smaller and medium income countries of the world.
In Figure 1.3, a shift of the production possibilities curve from PP1 to PP2 could be caused by
A. The use of improved production technology. B. A decrease in the quantity of raw materials available. C. A decline in the production skills of workers. D. All of the choices are correct.