While the country of New Zafariland specializes in dairy products, its geographical neighbor, Zwansea specializes in heavy machinery. New Zafariland exports dairy to Zwansea, which in turn exports heavy machinery to New Zafariland. According to the theory of comparative advantage, this mutually beneficial trade relationship best illustrates
A. A zero-sum game.
B. The significance of trade barriers
C. A positive-sum game
Answer: C. A positive-sum game
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The real rate of interest
A) is equal to the nominal rate when Y equals YN. B) is equal to the nominal rate minus the rate of inflation. C) is equal to the nominal rate plus the rate of inflation. D) is never negative.
In the short run, producers derive surplus from market exchange because
a. total revenue is greater than the minimum amount they would require to sell the good b. total revenue is equal to the minimum amount they would require to sell the good c. total revenue is less than the minimum amount they would require to sell the good d. marginal revenue equals average total cost e. they can rob consumers of most of their consumer surplus
A decrease in government purchases can close an expansionary gap by shifting the aggregate demand curve
a. True b. False Indicate whether the statement is true or false
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