Suppose it takes Paul 3 hours to bake a cake and 2 hours to mow the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?
A. Paul has the absolute advantage in mowing the lawn.
B. Paul has the absolute advantage in baking cakes.
C. Paul has the comparative advantage in mowing the lawn.
D. Paul has the comparative advantage in baking cakes.
Answer: D
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That part of national income not spent on consumption is defined as
a. transitory income b. permanent income c. disposable income d. autonomous consumption e. saving
For an economy, aggregate demand equals
a. consumption plus investment plus government purchases plus exports. b. consumption plus investment plus government purchases plus (exports minus imports). c. consumption plus investment plus (taxes minus transfers) plus (exports minus imports). d. consumption plus investment plus government purchases plus (imports minus exports).
The marginal cost is the cost of ______.
a. inefficiency and waste while producing a good b. taxes levied on the production of a good c. producing all of the units of a good d. producing one more unit of a good.
If a good has a price elasticity of demand coefficient less than one, then:
A. this good has an elastic demand. B. this good has an inelastic demand. C. a 10 percent increase in the price will result in a greater than 10 percent decrease in the quantity demanded. D. the demand curve will be vertical.