Give some examples of the operation of the principle of comparative advantage.
What will be an ideal response?
ANS:
Here the student might note that many auto producers buy parts for their cars from specialized suppliers, even though the auto company might be able to make them more cheaply. The automobile company benefits by concentrating on the assembly of autos rather than on making parts. Restaurants, such as McDonald’s, Burger King, and Wendy’s, construct new restaurants every year. Rather than own and operate these restaurants, most are sold as franchises for individuals to operate.
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A decline in interest rates tends to expand the economy by
A. encouraging private investment and decrease in bank lending. B. appreciating the currency and lowering the profitability criterion for investments. C. decreasing the cost of capital and reducing net exports. D. depreciating the currency and raising net exports.
In reality, decisions made by firms may not always produce maximum total profit because some executives
a. are more motivated by altruism. b. are more interested in market share than profits. c. may push research and development to the point that profits decline. d. All of the above are correct.
Which of the following statements about mutual funds is correct?
a. A mutual fund is a financial intermediary. b. A mutual fund acquires its funds primarily by selling shares to the public. c. People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio. d. All of the above are correct.
One reason why the "fast-casual" restaurant market is competitive is that
A) demand for "fast -casual" food is very high. B) it is trendy and therefore is likely to have a customer following. C) barriers to entry are low. D) consumption takes place in public.