Explain why positive economies of scale in one (of two) sectors may establish a comparative advantage for the large (as compared to the small) country in the production of the commodity which exhibits positive scale economies
What will be an ideal response?
In the case of the H-O model, the actual size of the country is irrelevant in the determination of the direction of trade (though it may affect the equilibrium terms of trade). When positive scale economies apply to the production of one product, the country that can devote more resources (in absolute terms) will be able to sell that product cheaper, and therefore will be more likely to gain a "revealed" comparative advantage in that product. This will be the country with more factors (both labor and capital)-the larger country.
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Refer to Supply and Demand. The social gain from a draft is represented by
The following questions refer to the accompanying graph, which shows the supply and demand for military service where Q0 represents the quantity provided by a volunteer army and Qd the quantity provided by a draft.
a. areas A + B + F.
b. areas A + B + F - E.
c. areas B + F.
d. Areas A + B + C + D.
Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point X?
A) 5 million tons of paper B) 19 million tons of steel C) 9 million tons of paper D) 5 million tons of steel
A disadvantage of the corporate form of business organization is
A) double taxation. B) limited access to capital. C) that the corporation can only do business in the state where it was incorporated. D) unlimited liability for shareholders.
Many economists consider medical care a superior good. Which of the following statements is true regarding a superior good?
a. Consumers want more of a superior good regardless of its price. b. When the price of a superior good increases, consumers demand more of it. c. As consumer income increases a larger percentage of that income is spent on superior goods. d. A superior good has an income elasticity of demand greater than one. e. Both c and d are true of superior goods.