To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also
A) save.
B) invest.
C) engage in research and development.
D) trade.
D
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Answer the following statement(s) true (T) or false (F)
1. The major categories of market instruments are: pollution charges, deposit/refund systems, subsidies, and pollution permit trading systems. 2. A payment or tax concession aimed at lowering the cost of abating is called a pollution charge. 3. Because polluters ignore the MEC of environmental damage linked to the production of a good, too few resources are allocated to producing that good. 4. A pollution charge follows the “polluter-pays principle.” 5. If production of a good generates an environmental negative externality, the effect of that externality is captured by the MEC of production.
The domestic opportunity cost of producing 100 barrels of chemicals in Germany is 1 ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is 2 tons of steel. In this case
A. Germany has an absolute advantage in the production of chemicals. B. France has an absolute advantage in the production of chemicals. C. France has a comparative advantage in the production of chemicals. D. Germany has a comparative advantage in the production of chemicals.
If adding an initial 100 billion labor hours per year increases real GDP by $3 trillion, diminishing returns informs us that an additional 100 billion labor hours per year will increase real GDP by
A) exactly $3 trillion. B) less than $3 trillion. C) more than $3 trillion. D) either exactly $3 trillion or by less than $3 trillion, depending on whether the real wage rate remains constant or rises. E) some amount but there is not enough information to tell by how much.
Purchases of Huggies diapers should
A) increase in recessions and decrease in expansions. B) decrease in recessions and increase in expansions. C) remain fairly constant over the business cycle. D) increase in recessions and remain constant in expansions.