All of the following are economic functions of the government EXCEPT
A) providing a legal system.
B) determining the wage rate for most jobs.
C) promoting competition in the market.
D) providing public goods.
B
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The Ricardian proposition that international trade will benefit any country ("gains from trade") as long as the world terms of trade do not equal its autarkic relative prices is a straightforward and powerful concept
Nevertheless, it is impossible to demonstrate empirically. Why?
Individuals who fully insure their house and belongings against fire
A) have wasted their money if a fire does not occur. B) generally do so in order that their after-fire wealth can be equal to their before-fire wealth. C) generally do so in order that their after-fire wealth can be higher than their before-fire wealth. D) generally do so in order to guarantee that the worst outcome, a fire with no insurance, does not occur. E) can never come out as well financially after a fire as they were before it.
Mexico has a comparative advantage in producing corn:
A. regardless of the opportunity cost in other countries. B. if its opportunity cost of producing corn is higher than the opportunity cost in other countries. C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries. D. if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
Crowding out occurs when
A. increased taxes force higher levels of national saving. B. deficit spending by the government forces private investment spending to contract. C. local businesses cannot get government contracts because of the higher bids of large corporations. D. foreign investors are willing to pay higher prices for U.S. bonds than American citizens will pay.