Suppose that Canada can produce 15 units of timber or 3 units of grain. Suppose that Mexico can produce 6 units of timber or 2 units of grain. Which of the following is CORRECT?
A) Mexico has a comparative advantage in grain production.
B) Mexico has an absolute advantage in timber production.
C) Canada has a comparative advantage in grain production.
D) The countries would find trade mutually beneficial at a trading ratio of 1 grain for 2 timber.
A
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Banks create money by
A) printing currency. B) asking the Fed to print more currency. C) lending to the Fed. D) making loans. E) buying government securities.
Which of the following represents key strengths of the market economy as a system of allocation? a. Goods and services are allocated based on willingness and ability to pay,rather than based on need
b. Producers have strong incentives to innovate because successful innovatorsare rewarded with higher profit. c. Since price is freely set based on supply and demand, shortages and surplusesare minimized. d. All of the answers above are correct.