What benefits are to be gained from countries producing according to the law of comparative advantage? What if a country is absolutely more productive in all goods?
When countries produce according to the law of comparative advantage, and then trade, the consumption possibilities expand for all countries involved. This is because producing goods for which a country has a comparative advantage means that goods are produced at the lowest relative opportunity cost, thus freeing resources for the production of more goods. Even if a country has an absolute advantage, it will still gain from trade, because it is comparative, not absolute, advantage that determines which countries should produce which goods.
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During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result
A) the labor force participation rate rose. B) the unemployment rate rose. C) the unemployment rate fell. D) the labor force participation rate fell.
As the price of a good increases, the change in the quantity demanded can be shown by
A) shifting the demand curve leftward. B) shifting the demand curve rightward. C) moving down along the same demand curve. D) moving up along the same demand curve.
Behavioral economists have discovered that
A) transitivity of preferences always holds, even in animals. B) the law of demand does not hold in controlled experiments. C) transitivity of preferences does not always hold, especially for young people. D) reflexivity of preferences is not true.
Which of the following DOES NOT contribute to the market power of a firm?
A) number of available substitutes B) the color of the product C) legal protections D) the number of firms in the market