What is a model? Can you think of a model that you might use in your everyday life?
What will be an ideal response?
A model is a description of some aspect of the economic world. It includes only those features that are necessary to understand the issue under study. An economic model is designed to reflect those aspects of the world that are relevant to the user of the model and ignore the aspects that are irrelevant. A typical model is a GPS map. It reflects only those aspects of the real world that are relevant in assisting the user in reaching his or her destination and avoids using information irrelevant to travel.
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Based on Table 3.1, which country or countries has an absolute advantage and a comparative advantage in shoes?
A) Mexico has an absolute and comparative advantage in shoes. B) The United States has an absolute and comparative advantage in shoes. C) The United States has a comparative advantage, and Mexico has an absolute advantage in shoes. D) Mexico has a comparative advantage, and the United States has an absolute advantage in shoes. E) There is not enough information to tell.
A monopoly firm engaged in international trade will
A) equate marginal costs with marginal revenues in both domestic and foreign markets. B) equate average to local costs. C) equate marginal costs with foreign marginal revenues. D) equate marginal costs with the highest price the market will bear. E) equate marginal costs with the relative world prices.
Because many business situations are repeated games, firms may be able to avoid the prisoner's dilemma and implicitly collude to keep prices high
Indicate whether the statement is true or false
The effects of rent control in the long run include lower rents and lower-quality housing
a. True b. False Indicate whether the statement is true or false