If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. According to The Principle of Comparative Advantage, Ana and Leo will be able to produce more overall if:
A. Ana specializes in fudge and Leo specializes in toffee.
B. the Principle of Comparative Advantage does not hold in this example.
C. Leo specializes in fudge and Ana specializes in toffee.
D. both Leo and Ana specialize in fudge.
Answer: A
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The CPI measures the average prices paid by __________ for _________
A. urban consumers; a fixed basket of consumption goods and services B. urban consumers; the average basket of goods and services they buy C. all consumers; housing, transportation, and food D. everyone who earns an income; the necessities of life
How does the imposition of a penalty for possessing an illegal drug influence demand, supply, price, and the quantity of the drug consumed?
What will be an ideal response?
Tom and Jerry have two tasks to do all day: make dishes and build fences. If Tom spends all day making dishes, he will have make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day making dishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. At the end of the day, Jerry could have produced:
A. 14 dishes and 7 fences. B. 12 dishes and 6 fences. C. 10 dishes and 5 fences. D. 6 dishes and 4 fences.
If a central bank were required to target inflation at zero, then when there was a positive aggregate supply shock the central bank
a. would have to increase the interest rate. This would move unemployment closer to the natural rate. b. would have to increase the interest rate. This would move unemployment further from the natural rate. c. would have to decrease the interest rate. This would move unemployment closer to the natural rate. d. would have to decrease the interest rate. This would move unemployment further from the natural rate.