The trade model described in the text demonstrates that countries can expand consumption by specializing in the production of goods and services in which they have a comparative advantage. In reality we do not see complete specialization in production
State three reasons why this is case.
What will be an ideal response?
Three reasons outlined in the text are:
1. Not all goods and services are traded internationally.
2. As more exported goods are produced, the opportunity cost of producing additional units eventually increases.
3. Since most products are differentiated, some buyers prefer to purchase domestically produced products while others will prefer to buy similar products produced abroad. The automobile industry is a good example of this.
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One effect of government mandating participation in the auto insurance market is it leads to:
A. higher premiums for all participants. B. lower premiums for all participants. C. the collapse of the market. D. free coverage for some participants.
If marginal cost is rising,
a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.
Suppose coffee is sold in a monopolistically competitive market, where coffee is differentiated by coffee shop location. As firms enter in the long run and the price of coffee falls:
A. the market quantity of coffee demanded will increase, but the quantity of coffee supplied by any individual coffee shop declines. B. the market quantity of coffee demanded will decrease as does the quantity supplied from any individual coffee shop. C. the average costs of production decline. D. the profits of individual coffee shops increase.
________ seem as a group to be mildly regressive and ________ seem as a group to be mildly progressive.
A. Federal and state taxes; local taxes B. Federal taxes; state and local taxes C. State and local taxes; federal taxes D. Local taxes; federal and state taxes