What is the slope of the price consumption curve for two goods, x and y, when preferences are measured by the utility function U(x,y) = x0.5y0.5, the price of good y is $10, income equals $100, and the price of good x increases from $5 to $10?
A) slope equals zero
B) slope is -(1/2)
C) slope is 1/2
D) slope is infinite
Answer: A) slope equals zero
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When can a country gain a price advantage on imports by imposing a tariff?
A. When it is the largest country with absolute advantage in all goods B. When it has a comparative advantage in the production of all goods C. When it can do so without other countries retaliating with tariffs D. When trade agreements prohibit quotas but permit tariffs
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A) is earning positive economic profits. B) is earning negative economic profits. C) is making a normal rate of return on its capital investment. D) may be earning a positive or negative economic profits depending upon costs.
This graph demonstrates the domestic demand and supply for a good, as well as a tariff and the world price for that good.According to the graph shown, the change in consumer surplus brought about by the imposition of a tariff to an economy previously open to free trade is:
A. a loss of DE. B. a gain of DE. C. an increase of HIJKL. D. a loss of HIJKL.