In a two-country, two-commodity model, if a country has a comparative advantage in the production of a certain good, it implies that this country
A. also has an absolute advantage in the production of this good.
B. can produce this good at a lower opportunity cost than the other country.
C. will start importing this good from the other country.
D. uses most of its resources in the production of this good.
Answer: B
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In the circular flow model
A) households buy goods and services while firms sell goods and services. Firms obtain labor from households, capital from government, and raw materials from firms. B) households demand goods and services which are supplied by firms, and the firms demand resources that are supplied by intermediate firms. C) households buy goods and services and firms supply goods. Resources are supplied by other firms. D) households demand goods and services that are supplied by firms, while supplying resources that are demanded by firms.
Suppose the Christmas trees market is perfectly competitive. An owner is currently earning a profit of $1,000, the cost of producing and selling an additional Christmas tree is $25, the current market price is $20. The owner
A) should sell more trees. B) should not sell more trees. C) should advertise in the market to promote his sales. D) is not maximizing his profits.
An increase in the price level will: a. make the consumption function flatter. b. make the consumption function steeper
c. increase consumption because wages will increase. d. decrease consumption because falling interest rates make it cheaper to borrow. e. decrease consumption because the value of net wealth will decrease.
Germany could have avoided the high inflation that it experienced in the 1920s by
a. not directing so many of its resources toward preparation for World War II. b. not increasing taxes so much on the German middle class. c. not allowing the quantity of money to increase so rapidly. d. using government policies to stimulate the economy more so than what was done.