Why do people specialize and trade?
What will be an ideal response?
People can compare consumption possibilities from producing all goods and services through self-sufficiency against specializing in producing only those goods and services that reflect their comparative advantage and trading their output with others who do the same. People can then see that the consumption possibilities from specialization and trade are greater than under self-sufficiency. Therefore it is in people's own self-interest to specialize. It was Adam Smith who first pointed out in the Wealth of Nations how individuals voluntarily engage in this socially beneficial and cooperative activity through the pursuit of their own self-interest, rather than for society's best interests.
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The relationship between the growth rate of an economic variable, gt, and its level, yt, can be approximated by
A) gt = yt - yt - 1. B) gt = logt - log yt - 1. C) yt = log gt - log gt - 1. D) log gt = yt - yt - 1.
To maximizes profits, what price should ATC Communication charge?
The table below shows the demand curve and cost information for ATC Communication, a firm that is a monopoly.
a. $600
b. $800
c. $400
d. $200
The production possibilities curve represents
A) the maximum amount of labor and capital available to society. B) the combinations of goods and services among which consumers are indifferent. C) the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources. D) the maximum rate of growth of capital and labor in a country.
Externalities are effects of a transaction on
A. the sellers but not the buyers. B. the buyers but not the sellers. C. someone other than the buyer or seller. D. the buyers and sellers.