Assume there are only two countries in the world, Pacifica and Atlantica. Both countries produce and consume surfboards. The pre-trade price of surfboards in Atlantica is lower than the pre-trade price of surfboards in Pacifica. Draw a three-graph diagram to depict the Pacifica, Atlantica, and international markets for surfboards illustrating the pre-trade price difference. Now assume that free trade opens up between Pacifica and Atlantica. Depict a plausible world price in the graphs. Using one of the three graphs below, show what happens to overall economic welfare in the two countries. Be sure to label and refer to the graphs in your answer.
What will be an ideal response?
POSSIBLE RESPONSE:
The above graph illustrates a possible international price. The graph to the left represents demand and supply in Atlantica, the graph in the middle, the market in Pacifica, and the graph to the right, the world market. Da and Sa are the demand and supply curves for Atlantica respectively. Dp and Sp are the demand and supply curves for Pacifica respectively. The international price of 60 is between the no-trade prices of 40 and 70. The international price is such a price that the excess supply in Atlantica matches the excess demand in Pacifica. As a result, Atlantica exports 30 units to Pacifica at a price of 60. Both countries gain from international trade. Atlantica gains area C in the right graph, and Pacifica gains area F.
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The "standard of deferred value" function of money means it is:
a. Unit in terms of which everything is valued and the basis for establishing relative prices between goods and services. b. Asset people can use to accumulate wealth. c. Barter value of a product for which a nation has a comparative advantage. d. Asset individuals get for goods and services and then use later to purchase other goods and services. e. The unit in terms of which people write contracts.
Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market. The prices of l and m are $10 and $4 respectively. In equilibrium the MPs of l and m, respectively,
are: A. 1 and 1. B. 2 and 5. C. 10 and 4. D. 5 and 2.
Successive downward movements along the demand curve for the product of a monopolist always generate successive
A) increases in the monopolist's marginal revenue. B) increases in the monopolist's average total costs. C) decreases in the additional per-unit costs incurred by the monopolist. D) decreases in the additional per-unit revenues earned by the monopolist.
Rolando realizes that whenever he studies for at least two hours immediately before a physics exam, he gets an A on the exam, but when he does not study immediately before an exam, he gets no higher than a C on the exam. He concludes that the time spent studying immediately before the exams is responsible for his improved grades. Rolando is
A. very probably correct in his conclusion that the time spent studying immediately before his exams is a reason for his improved grades. B. definitely confusing correlation with causation. C. probably misguided in that there is no apparent correlation or causation in this situation. D. likely correct that there is causation, but the causation is more likely running in the opposite direction in that the improved exam grades forced him to study immediately before each test.