The original comparative advantage model that used the relative abundance of factors of production to explain comparative advantage assumed that countries:
a. employed all four factors of production; land, labor, capital, and entrepreneurship.
b. employed only two factors of production; labor and capital.
c. employed only two factors of production; land and entrepreneurial ability.
d. worked with a fixed capital stock.
e. were free to vary their employment of only one factor of production; labor.
b
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The main difference between GNP and GDP is:
a. GDP measures a nation's income, and GNP measures a nation's output. b. Largely in the minds of the public, because economically, there is no difference. c. GDP measures the income earned from the production of all final goods and services within a nation's borders; GNP measures the income earned by domestically-owned resources from producing final goods and services anywhere in the world. d. GDP measures a nation's output, and GNP measures a nation's income.
The proponents of fixed exchange rates argue that flexible exchange rates
A) hamper international trade because of uncertainty over what the exchange rate will be. B) force a nation to use its domestic macroeconomic policies to maintain an exchange rate. C) lead to trade protectionism. D) a and b E) a, b, and c
Which of the following is a reason to study economics?
A. Economic analysis explains daily events. B. It helps us understand why people, firms and government behave in a certain way. C. We need to understand relevant economic applications and policy issues. D. It provides useful logic for solving complex problems. E. All of these
A risk premium is
A. lower the more risky the future stream of profits. B. an additional compensation paid to the workers of a business enterprise. C. subtracted from the discount rate when calculating the present value of a future stream of profits. D. a measure calculated to reflect the riskiness of future profits.