Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,
a. Mexico will never have a comparative advantage and, thus, can never gain from trading with the United States.
b. trade between the United States and Mexico will make the United States better off but will leave Mexico worse off unless the wage of workers in Mexico rises to equal that of American workers.
c. total production of corn and shirts cannot be increased through specialization and trade.
d. both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Mexico than in the United States.
D
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In the above figure, the shift from AD1 to AD2 might have been the result of
A) an increase in government expenditure. B) a decrease in taxes. C) an increase in the quantity of money. D) All of the above answers are correct.
One reason China has been able to grow so rapidly even though its financial development is still in its early stages is
A) the high savings rate of around 40%. B) the shift of labor to the agricultural sector. C) the stringent enforcement of financial contracts. D) the ease of obtaining high-quality information about creditors.
Harry's HVAC sells its new units bundled with after sales service. Why would it want to do that?
a. To ensure that the customer knows that they are stuck with Harry's service technicians b. To ensure that only the highest paid personnel get to service the units c. To ensure that the customers do not buy second-class servicing and then infer faulty design if a unit breaks down due to inadequate service d. All of the above
Differentiate between the coordination problem and the incentive problem
What will be an ideal response?