Explain why government actions that make industries more competitive do not create comparative advantage
What will be an ideal response?
Because governments spend resources in order to make industries more competitive, price of goods in these industries no longer reflects the true costs of production (on which comparative advantage is based.
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An income tax cut ________ aggregate demand and ________ aggregate supply
A) increases; decreases B) increases; increases C) decreases; decreases D) decreases; increases E) does not change; increases
From 8 P.M. to 10 P.M., Susan can attend a movie, study, or talk with friends. Suppose that Susan decides to go to the movie but thinks that, if she hadn't, she would otherwise have talked with friends
The opportunity cost of attending the movie is A) talking with friends and studying. B) studying. C) talking with friends. D) two hours of time.
The law of diminishing marginal utility states that total utility increases by smaller and smaller increments as more of a good is consumed
Indicate whether the statement is true or false
Risk diversification refers to the process by which:
A. insurance companies change the risk aversion of their clients. B. insurance companies reallocate the likelihood of catastrophes happening. C. people organize themselves in a group to collectively absorb the cost of the risk faced by each individual. D. risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual.