The gap between a country's potential output and its consumption is most directly related to its:
A. exchange rate.
B. budget deficit.
C. comparative advantage.
D. trade deficit.
Answer: D
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If a marginal cost pricing rule is imposed on the firm in the figure above, the consumer surplus will be
A) zero. B) $800. C) $400. D) $200.
Distinguish between production efficiency and allocative efficiency. Explain why many production possibilities achieve production efficiency but only one achieves allocative efficiency
What will be an ideal response?
In a market system, how are the terms of exchange established?
a. Industry associations set up acceptable price ranges for their goods, and firms within each industry are required to set price within its relevant range. b. The forces underlying supply and demand interact to set a price c. Federal and state legislation establish minimum and maximum prices. d. Consumer advocacy groups establish fair prices for items, and most firms comply because they don’t want to anger their customers.
Several economists have hypothesized that the terms of trade for developing countries will decline over time. Which of the following might be a cause of this decline?
a. Technological progress in manufactured goods has caused their prices to fall. b. Some developing countries are able to keep the price of their exports high by restricting supplies on the world market. c. Increased demand for developing country exports has caused prices of developing country exports to rise. d. The demand for primary product exports from developing countries has not risen as fast as the demand for manufactured exports of industrialized countries.