Assume a two-country, two-commodity, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW (K/L)automobiles > (K/L)shoes(K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in the production of shoes.Assume further that technology and tastes are the same in the United States and the Rest of the World. This information indicates that the United States
A. is a relatively land-abundant country.
B. is a relatively capital-abundant country.
C. has a scarcity of land.
D. is a relatively capital-scarce country.
Answer: B
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Why do most firms in monopolistic competition typically make zero profit in the long run?
A) because the lack of entry barriers would compete away profits B) because the total market is not large enough to accommodate so many firms C) because firms do not produce at their minimum efficient scale D) because firms produce differentiated products
According to liquidity preference theory, if the quantity of money demanded is greater than the quantity supplied, then the interest rate will
a. increase and the quantity of money demanded will decrease. b. increase and the quantity of money demanded will increase. c. decrease and the quantity of money demanded will decrease. d. decrease and the quantity of money demanded will increase.
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to
What will be an ideal response?
With marginal cost pricing
A. there cannot be any short-run economic profit. B. all opportunity costs will be covered in the short run. C. the price charged is equal to the opportunity cost to society of producing one more unit of the good. D. marginal benefits are usually less than marginal cost.