Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:
A. people in Portugal will not want to buy as many hats.
B. Spain no longer has a comparative advantage in hats.
C. some of the gains from trade shift to Spain.
D. some of the gains from trade shift to Portugal.
Answer: D
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The equilibrium exchange rate is 0.70 euros per dollar. At this exchange rate, the quantity demanded equals the quantity supplied and is $1.3 trillion a day. If the exchange rate is now 0.80 euros per dollar, then
A) there is a shortage of dollars and the exchange rate falls. B) there is no change. C) there is a surplus of dollars and the exchange rate falls. D) there is a surplus of dollars and the exchange rate rises. E) there is a shortage of dollars and the exchange rate rises.
The university you attend needs to increase total revenue. The president suggests that by raising tuition by 5%, total revenue will increase. However, after the tuition increase, total revenue actually fell
What can you infer about the price elasticity of demand for an education at your university? Why is this likely to be true? What did your university president assume to be true about the price elasticity of demand for an education at your university?
In 1996, Archer Daniels Midland Company was found guilty of fixing the price of lysine. This is an example of:
A. judgment by design. B. judgment by performance. C. judgment by structure. D. judgment that is not part of U.S. antitrust policy.
Which of the following is an example of a positive statement?
A. Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test. B. When the price of an item increases, people respond by reducing their consumption of the item. C. The government should balance the budget. D. It is too hot to go jogging.