Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. Which of the following is true in this case?
A. Adam has an absolute advantage in oranges and a comparative advantage in apples.
B. Karl has an absolute advantage in oranges and a comparative advantage in oranges.
C. Karl has an absolute advantage in both apples and oranges.
D. Karl has an absolute advantage and a comparative advantage in apples.
Answer: B. Karl has an absolute advantage in oranges and a comparative advantage in oranges.
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If the demand and supply both increase equally, then the equilibrium price ________ and the equilibrium quantity ________
A) increases; increases B) increases; does not change C) does not change; increases D) increases; decreases E) decreases; does not change
The process of entry and exit into a monopolistically competitive market continues until:
A. profits are zero. B. long-run equilibrium is reached. C. price is equal to average total cost. D. All of these statements are true.
After the Revolutionary War, the U.S. monetary system was based on gold. Historically, why did the U.S. adopt the use of gold as a currency? How does this compare with the currency used today?
What will be an ideal response?
Refer to the diagram for a pure monopolist. If a regulatory commission sets the price to achieve the socially optimal allocation of resources, it will have to:
A. tax the monopolist P 3 P 1 per unit to prevent the monopolist from realizing an economic
profit.
B. subsidize the monopolist or the monopolist will go bankrupt in the long run.
C. subsidize the monopolist P 1 P 4 per unit to allow the monopolist to break even.
D. tax the monopolist P 1 P 2 per unit to prevent the monopolist from realizing an economic
profit.