"Everybody has a comparative advantage in something." Do you agree or disagree? Why?
What will be an ideal response?
Agree. Since comparative advantage is based on relative abilities, everyone has a comparative advantage in something. If A is better at B at everything, but A is 50 percent better than B in activity X while only 20 percent better than B in activity Y, B has a comparative advantage in Y because B must give up less X to produce another Y than A. The relativity of the concept implies that everyone has a comparative advantage in something.
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Figure 4.5 illustrates a set of supply and demand curves for hamburgers. A decrease in supply and an increase in demand are represented by a movement from
A) point d to point c. B) point b to point d. C) point c to point b. D) point c to point a.
By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, the inflation rate exceeded 10%. By the end of 1986 the inflation rate had been brought down to 1.9%. Which of the following is true about the Volcker Disinflation?
A) lower inflation resulted from a tightening of monetary policy B) by raising the federal funds rate to over 20%, the Federal Reserve stimulated the economy resulting in lower levels of both inflation and the unemployment rate by the early 1980s C) the unemployment rate was brought down by 1982 but it took longer to reach lower inflation rates D) all of the above E) none of the above
Sylvia allocates her monthly income between Food and Housing. Her budget share spent on food in a given month is always 30%, and for Sylvia, food is a "necessity" (income elasticity between zero and one)
Derive the maximum and minimum values for the income elasticity of demand for housing.
When the demand for grapes decreases and the supply of grapes increases at the same time, we can predict that the: a. price of grapes will fall
b. price of grapes will rise. c. quantity of grapes exchanged will fall. d. quantity of grapes exchanged will rise.