Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile
A. has a lower opportunity cost for copper, which means that it should specialize in production of copper and engage in trade.
B. has a lower opportunity cost for producing copper, but specialization is not feasible because Argentina has a lower monetary cost of copper production.
C. should continue to produce copper, but only for domestic consumption, because trade is not a viable option.
D. has a higher opportunity cost for copper, which means it should specialize in the production of wheat and engage in trade.
Answer: A
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For each of the following scenarios, state the effect on the debt-to-GDP ratio:
a. The growth rate of the labor force increases. b. The primary deficit increases. c. Total factor productivity decreases. d. Seigniorage decreases. e. The nominal interest rate is constant and the growth rate of the money supply increases. f. The nominal interest rate is not constant and the growth rate of the money supply increases.
If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should
a. decrease his spending on cola. b. decrease his spending on cola and decrease his spending on shirts. c. decrease his spending on shirts. d. increase his spending on cola and decrease his spending on shirts.
Suppose that a new customer opens a checking account and a saving account, placing $50,000 in each. Later, the bank makes a loan of $100,000 to a business firm. For this bank
A) assets increased by $100,000 because the loan is an asset, and liabilities increased by $100,000 because the checking and saving accounts are liabilities. B) assets increased by $100,000 because the checking and saving accounts are assets, and liabilities increased by $100,000 because the loan is a liability. C) assets increased by $50,000 because the saving account is an asset, while liabilities increased by $50,000 because the checking account is a liability. D) assets remained unchanged but liabilities increased by $100,000 because of the loan.
If the labor force in an economy is not fully employed, then
a. the economy is operating outside of its production possibilities frontier b. the economy is operating on its production possibilities frontier c. there must have been an increase in technology to compensate for the labor shortage d. the opportunity cost of producing more of one good is negative e. the economy is operating inside its production possibilities frontier