Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people
What will be an ideal response?
One person, when she spends all of her time producing one good or the other, can produce more of either good than the other person. This person has an absolute advantage in producing both goods. However, gains from trade exist when the opportunity costs associated with each good are different for both people. If the costs of producing one good in terms of the forgone production of the other good differ for the two people, then they can gain from trade.
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The exchange rate can be influenced by a nation's central bank
Indicate whether the statement is true or false
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded
A) will increase by 5 percent. B) will decrease by 5 percent. C) will increase by 45 percent. D) will decrease by 45 percent.
In the short run, the monopolist should continue to produce whenever
a. price is greater than zero b. price is less than average total cost c. price is greater than average variable cost d. price divided by average total cost exceeds the ratio of marginal cost to average cost at the optimal output e. price is less than average variable cost at the optimal output
A reason that economists keep an eye on both M2 and M1 is because:
A. M2 is more accurate than M1. B. both fluctuate widely and frequently in total dollar value. C. money market accounts are sometimes used like checking accounts and sometimes used like savings accounts. D. during a recession, M1 is meaningless.