In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?
A) Joe will specialize in shirts and Jill will specialize in pants.
B) Joe will specialize in pants and Jill will specialize in shirts.
C) Joe and Jill each will be able to consume more than 2 shirts and 2 pairs of pants.
D) Both answers B and C are correct.
D
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A drug dealer earned $85,000 during a year by selling illegal drugs. His income will:
A) cause the GDP of his country to increase. B) not affect the calculation of his country's GDP. C) cause the GDP of his country to decrease. D) lead to an increase in his country's exports.
Medicare is an example of a third-party payment for medical services that
A) causes providers to supply less of medical services than they would without the payment. B) causes buyers to consume more of medical services than they would without the payment. C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. D) causes the price of medical services to rise for the consumer once the payment is provided.
The short-run aggregate supply curve is most likely to shift down (to the right) when actual output is:
A. not equal to potential output, regardless of whether it is above or below. B. less than potential output. C. equal to potential output. D. greater than potential output.
Suppose output exceeds potential output and contractionary fiscal policy is enacted. According to the AS/AD model, in the long run, this fiscal policy will produce:
A. a lower price level than would otherwise have occurred if no action were taken. B. a lower output level and a lower price level than would have occurred if no action were taken. C. neither a lower price level nor a lower output level than would otherwise have occurred if no action were taken. D. a lower output level than would otherwise have occurred if no action were taken.