Give a definition of an advance in technology. Suppose that you are drawing a PPF for civilian goods and military goods, describe the effect on the PPF of an advance in technology in both civilian goods and military goods. How would the impact on the PPF be different if the technological improvement only helped in the production of military goods, but not civilian goods?
An advance in technology commonly refers to the ability to produce more output with a fixed amount of resources (or the same amount of output with a smaller amount of resources). When technology advances in the production of both products the PPF shifts outward. When technology advances in the production of military goods, but not civilian goods, the PPF shifts outward along the axis for military goods and the intercept remains constant along the axis for civilian goods.
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Refer to Figure 7.1. Suppose that instead of $350, Angus earns only $250 by playing the bagpipes, but all other earnings remain the same. If there is no ordinance against loud music, the Coase theorem predicts that
A) Dudley will pay Angus to not play the bagpipes. B) Angus will pay Dudley so Angus can play the bagpipes. C) Dudley will do nothing and Angus will mop floors. D) no bargain can be reached between Angus and Dudley.
If inflation in the United States is lower than inflation in other countries, what will be the effect on net exports for the United States?
A) Net exports will rise as U.S. exports increase. B) Net exports will decrease as U.S. imports decrease. C) Net exports will decrease as U.S. exports decrease. D) Net exports will rise as U.S. imports increase.