It is argued that if a rich high wage country such as the United States were to expand trade with a relatively poor and low wage country such as Mexico, then U.S. industry would migrate south, and U.S. wages would fall to the level of Mexico's
What do you think about this argument?
The student may think anything. The purpose of the question is to set up a discussion, which will lead to the models in the following chapters.
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In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, investment is fixed at 50, government purchases are fixed at 150, and net exports are fixed at 20. Short-run equilibrium output in this economy equals:
A. 1,280. B. 1,000. C. 1,160. D. 1,440.
An example of a microeconomic decision is a situation in which
A) the Federal Reserve considers how much to increase the money supply during the coming month in an effort to constrain the rate of inflation. B) Congress and the president seek to reach a compromise on how much to increase government spending in an effort to influence national expenditures. C) a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. D) the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange rates with an aim to boosting demand for U.S. goods and services.
Discuss the second welfare theorem. How can societies use competitive markets to achieve both efficiency and equity?
What will be an ideal response?
The monopolist, unlike the perfectly competitive firm, continues to earn an economic profit in the long run because
a. it can charge a higher price than its competitors and not lose market share b. it can innovate, using its profit as research investment c. it can out-compete its competitors d. it has considerable market share e. of impossible-to-overcome barriers to entry