What are the definition and purpose of potential GDP?
What will be an ideal response?
The potential GDP is the maximum amount of economic output an economy can sustain at any moment, without inducing an increase in the inflation rate. It illustrates the utilization of all available resources. The potential GDP helps define how large an economy is able to grow, given the inputs available.
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Refer to Table 9-11. Prior to trade, what was the opportunity cost to produce 1 hat in Belize?
A) 1/2 of a clock B) 2/3 of a clock C) 1.5 clocks D) 2 clocks
The "Discount Department Stores" industry is highly concentrated. What does this mean?
A) The sales volume in this industry is consistently high. B) There are many large stores such as Wal-Mart, Target, Kohl's, in this industry. C) A few large stores account for a significant portion of industry sales. D) There is cut-throat competition in this industry because there are no entry barriers.
Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,
a. Mexico will never have a comparative advantage and, thus, can never gain from trading with the United States. b. trade between the United States and Mexico will make the United States better off but will leave Mexico worse off unless the wage of workers in Mexico rises to equal that of American workers. c. total production of corn and shirts cannot be increased through specialization and trade. d. both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Mexico than in the United States.
If the MPP of an additional unit of labor is 4 units per hour, product price is constant at $5 per unit, and the wage rate is $19 per hour, then
A. The employer should lower wages and accept less employment of labor. B. The additional unit of labor should be employed. C. Product price must be reduced if profits are to be made. D. The additional unit of labor should not be employed because it costs more than it is worth.