Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and fish. Ginger can gather more mangoes per hour than Maryann and can also catch more fish per hour than can Maryann. Therefore:
A. Maryann should specialize in the activity for which she has a comparative advantage.
B. Ginger should specialize in the activity for which she has an absolute advantage.
C. there are no gains to specialization and trade for Maryann.
D. there are no gains to specialization and trade for Ginger.
Answer: A
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When choosing the right amount of a public good to supply, the government often:
A. guesses, because people have an incentive to overstate a good's value. B. provides too much, because people have an incentive to understate a good's value. C. provides too little, because people have an incentive to overstate a good's value. D. fails to provide it, because people have an incentive to understate a good's value.
Adverse selection is most likely to be a problem when:
A. the good being exchanged has negative externalities. B. there are public goods involved. C. one side of the market, either buyer or seller, has better information than the other side. D. the good being exchanged has free rider problems.
The manager of a baseball team wants to hire a new pitcher for $4 million per year. Under what circumstances would it make sense for the team to do so?
What will be an ideal response?