If someone can produce a good at a lower opportunity cost, she ________ in producing that good.
A. experiences no marginal costs
B. has an absolute advantage
C. has a comparative advantage
D. experiences no diminishing returns
Answer: C
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The above figure shows the U.S. market for 1 carat diamonds. Area A + area B + area C + area D is the
A) deadweight loss from the import quota. B) importers' profit from the quota. C) decrease in consumer surplus due to the import quota. D) gain in total surplus due to the import quota. E) increase in producer surplus due to the import quota.
During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because
A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs. B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward. C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs. D) Both answers A and C are correct.
In the market for reserves, when the federal funds interest rate is below the discount rate, the supply curve of reserves is
A) vertical. B) horizontal. C) positively sloped. D) negatively sloped.
Answer the following statement true (T) or false (F)
1) The Celler-Kefauver Act made vertical mergers legal, provided each firm does not have more than 30 percent of its relevant market. 2) The legal cartel theory indicates that, in any industry where market demand and the long-run average total cost curve intersect close to the latter's minimum, government regulation is mandatory and desirable. 3) The Consumer Product Safety Commission engages in social regulation, rather than industrial regulation. 4) The Americans with Disabilities Act of 1990 is an example of industrial regulation.