Answer the following questions true (T) or false (F)
1. It is not possible to have a comparative advantage in producing a good or service without having an absolute advantage.
2. If Abigail can make more candles in one day than Pierre, then Abigail has an absolute advantage in making candles.
3. If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods.
1. FALSE
2. TRUE
3. TRUE
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Under which of the following circumstances would we observe the greatest increase in real income?
A. Nominal income falls by 2 percent, and the price level falls by 10 percent. B. Nominal income falls by 4 percent, and the price level rises by 6 percent. C. Nominal income rises by 12 percent, and the price level rises by 15 percent. D. Nominal income rises by 8 percent, and the price level rises by 4 percent.
The 1990s saw inflation fall and real growth increase in the U.S. and in many other countries. This is partially attributed to all of the following except:
A. redesign of many central banks. B. technological innovation. C. central banks focused more on exchange rates in a global environment. D. central banks became better at their jobs.
Refer to the graph below for the health care market. The marginal cost of health care would be greater than the marginal benefit if the quantity consumed is:
A. 100
B. 200
C. 300
D. 400
If a firm finds that the wage rate (W) is less than the value of marginal product (VMP), then to maximize its profit the firm should hire
A) less labor, which will increase the VMP. B) more labor, which will decrease the VMP. C) no more or less labor, because profits are greatest when W < VMP. D) more labor, because hiring more labor will increase both W and VMP until they are equal.