The U.S. can produce pizza for $7.50 each and barrels of beer for $37.50 each, and Germany can produce pizza for €5 each and barrels of beer for €15 each (€ is the symbol for the euro, the currency Germany uses). If the exchange rate is 1
50 $/€ then A) the U.S. has a comparative advantage in the production of beer.
B) neither country has a comparative advantage in the production of beer.
C) the U.S. has a comparative advantage in the production of pizza.
D) the U.S. has a comparative advantage in the production of beer and pizza.
C
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Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000 . The marginal cost of making a wedding cake is $200 . In order to maximize profits, Laura should
a. make more than 20 wedding cakes per month. b. make fewer than 20 wedding cakes per month. c. continue to make 20 wedding cakes per month. d. We do not have enough information to answer the question.
Recall the Application about the government of Mexico City repainting highway lane lines to transform a 4-lane highway into a 6-lane highway to answer the following question(s).When the government converted the highway from 4 lanes into 6 lanes, they claimed the capacity had increased by 50 percent. When the government switched the highway back from 6 lanes to 4 lanes, they claimed the capacity had been decreased by 33 percent. Had the government used the midpoint method, the percentage increase would have been ________ percent and the percentage decrease would have been ________ percent.
A. 33; 50 B. 33; 33 C. 40; 40 D. 50; 50