Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people
What will be an ideal response?
One person, when she spends all of her time producing one good or the other, can produce more of either good than the other person. This person has an absolute advantage in producing both goods. However, gains from trade exist when the opportunity costs associated with each good are different for both people. If the costs of producing one good in terms of the forgone production of the other good differ for the two people, then they can gain from trade.
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Luke won tickets to see a rock music concert. Even though Luke is a rhythm and blues fan, he goes to the concert anyway. Twenty minutes later, Luke decides he hates the music and the screaming fans, and he walks out an hour before the concert is scheduled to end. Luke's behavior demonstrates what economic concept?
A. Irrational behavior B. Rational behavior C. The fungibility of money D. None of these explain Luke's behavior.
Suppose the government ran a budget surplus in 2010 and a larger surplus in 2011 . The loanable funds model would predict that, as a result of the increase in the surplus,
a. both the government debt and interest rates increased between 2010 and 2011. b. both the government debt and interest rates decreased between 2010 and 2011. c. the government debt increased and interest rates decreased between 2010 and 2011. d. the government debt decreased and interest rates increased between 2010 and 2011.
In a binding situation, equilibrium is where the IS curve crosses the interest rate at zero.
Answer the following statement true (T) or false (F)
Refer to the figure below. Suppose the solid line represents the current supply of Star Wars action figures. If retailers learn that a new Star Wars movie will be released in several months, this news is likely to cause: 
A. neither a change in supply nor a change in quantity supplied since only future demand will change. B. a decrease in the quantity supplied, but no change in current supply. C. current supply to shift to S(B) in anticipation of higher future prices. D. current supply to shift to S(A) in anticipation of higher future prices.