Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The opportunity cost of one tomato in Country A is:
A. 4 bananas.
B. 5 bananas.
C. 100 bananas.
D. 20 bananas.
Answer: B
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Which of the following will most likely cause an outward shift in the production possibilities curve?
a. a reduction in the man-made productive resources available to the economy as the result of a decline in investment b. an increase in government payments to farmers for taking land out of production c. an increase from 40 to 50 hours in the average number of hours worked per week d. None of the above would cause an outward shift in the production possibilities curve.
Producers were accused of price gouging as the price of bottled water soared after Hurricane Andrew. Consumers clamored for price controls to keep bottled water at pre-Andrew levels. Use supply and demand analysis to graphically show the effect of
setting a price ceiling on bottled water after Hurricane Andrew at the pre-hurricane equilibrium price. Use your graph to assist in explaining the likely unintended effects of such a price control. Be sure that your graph is completely and correctly labeled.
When firms in a U.S. industry outsource some of their production,
A) both U.S. labor demand and U.S. wages in the industry fall B) U.S. labor demand falls, but U.S. wages are not affected. C) U.S. labor demand remains unchanged, but U.S. wages fall. D) U.S. labor demand falls, but U.S. wages increase.
Which of the following statements best describes the level of potential output in the U.S.?
A. It has been decreasing since 1999 B. It never changes year to year C. It usually increases year to year D. It is very erratic year to year