Suppose that Country A has an absolute advantage over country B in the production of both wheat and cloth. The opportunity cost of 1 unit of wheat is 2 units of cloth in Country A and 3 units of cloth in Country B. If each country specializes in producing the good in which it is relatively more efficient and then trades for the other good, it follows that
a. all the resulting gains in consumption will go to Country A.
b. all the resulting gains in consumption will go to Country B.
c. each country will experience half the resulting gains in consumption.
d. the allocation of the resulting consumption gains will be determined by bargaining between the two countries.
d. the allocation of the resulting consumption gains will be determined by bargaining between the two countries.
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Use the following figure for the federal funds market to answer the next question.
If the Fed supplies $200 billion in reserves, the equilibrium prime rate is ________.
A. 5.5% B. 5.0% C. 6.0% D. Undeterminable with the information given.
If differentiation makes the market demand curve less elastic, then
A) consumer surplus increases. B) the market structure changes into a monopoly. C) price markup over marginal cost is lower than when products are identical. D) price markup over marginal cost is higher than when products are identical.
In order to not face tradeoffs, scarcity would have to be eliminated
a. True b. False Indicate whether the statement is true or false
Equilibrium price is best described as the price
a. at which excess demand is less than excess supply b. at which there is an excess demand c. at which there is an excess supply d. that tends to fall because of an excess supply e. at which excess demand and excess supply equal zero