The theory of comparative advantage suggests that nations should produce a good if they:
A. have the lowest opportunity cost.
B. have the lowest wages.
C. have the most resources.
D. can produce more of the good than any other nation.
Answer: A
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The concept of "the invisible hand" suggests that markets
A) do not produce the efficient quantity. B) are always fair. C) produce the efficient quantity. D) are unfair. E) allocate resources unfairly and inefficiently.
In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as ________
A) the rival's price is above marginal cost B) the rival's price is below marginal cost C) the rival's price is above average cost D) the rival's price is below average cost
Using the Keynesian model, the effect of a decrease in the effective tax rate on capital would be to cause ________ in the real interest rate and ________ in output in the short run
A) a decrease; a decrease B) a decrease; no change C) an increase; an increase D) no change; a decrease
When a transfer price decreases
a. the costs of the division using the intermediate product will fall b. the profits of the division using the intermediate product will be unaffected c. the profits of the division using the intermediate product will fall d. the profits of the division using the intermediate product will rise