Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?
A) Belize coffee producers would gain from trade.
B) Belize coffee consumers would gain from trade.
C) Belize would gain tariff revenue from trade.
D) All of these answers are gains from trade.
A
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Clarity Dence pays $375 for a used acoustic guitar from the local music instrument dealer. The dealer himself purchased it for $150. In principle, how would this exchange affect GDP?
A) Nothing happens to GDP, because the guitar is a used good. B) GDP increases by $150. C) GDP increases by $225. D) GDP increases by $375. E) GDP increases by $525.
If full-employment output exceeds equilibrium output, greater deficit spending will result in a
A. Smaller recessionary gap. B. Larger recessionary gap. C. Smaller inflationary gap. D. None of the choices are correct.
What do economists call the difference between the most an individual is willing to pay for an item and what the individual actually has to pay?
a. price elasticity b. consumer surplus c. indifference curve d. payment terms
Empirical tests of the theory of comparative advantage have provided
A) strong support for both the Ricardian and Heckscher-Ohlin models. B) mixed support for the Ricardian model and strong support for the Heckscher-Ohlin model. C) strong support for the Ricardian model and mixed support for the Heckscher-Ohlin model. D) mixed support for both Ricardian and Heckscher-Ohlin models. E) no support for either the Ricardian or the Heckscher-Ohlin models.