Suppose Panama produces only two goods, bananas and hats. If Panama has a comparative advantage in bananas, a move toward free trade will:
A. harm hat workers, benefit banana workers, but benefit the nation as a whole.
B. harm hat workers, harm banana workers, but benefit the nation as a whole.
C. benefit hat workers, harm banana workers, but harm the nation as a whole.
D. benefit hat workers, harm banana workers, but benefit the nation as a whole.
Answer: A
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Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?
What will be an ideal response?
We assume leisure is a normal good. This implies that
A) an increase in taxes decreases the demand for leisure. B) households maximize utility. C) preferences over consumption are well defined. D) an increase in the wage increases demand for leisure.
The law of comparative advantages explains why
A. advanced nations will not trade with less-developed countries. B. an advanced nation will not trade with other countries. C. less-developed countries only trade among themselves. D. nations trade with each other, regardless of their relative levels of economic development. E. nations erect trade barriers.
Here is a consumption function: C = C0 + MPC(Yd). If MPC is 0.80, then we know that
A) as Yd rises by $1, Co rises by $0.80. B) as Yd rises by $1, C rises by $0.80. C) Yd rises by $0.80. D) as C0 rises by $0.80, Yd rises by $1.