Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ________ will gain from that trade because ________
A) both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs.
B) neither country; their consumption possibilities will not change.
C) only the United States; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.
D) only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.
A
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The welfare analysis of advertising is controversial because evaluation of the effect of advertising on aggregate surplus depends on:
A. the marginal cost of the advertising. B. whether the inframarginal consumer is influenced by the advertising. C. whether the advertising is tied to a quality increase. D. the reason it succeeds in increasing demand.
The graph shown exhibits constant returns to scale:
A. in region a. B. in region c. C. in regions a, b, and c. D. in region b.