If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?
A. Leo has both the absolute advantage and the comparative advantage in fudge.
B. Ana has the comparative advantage in toffee, but Leo has the absolute advantage in toffee.
C. Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge.
D. Ana has both an absolute advantage and the comparative advantage in fudge.
Answer: C
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During October and November 2008, gasoline prices were falling dramatically making travel by car less expensive but air travel prices were as high as ever
If travel by car is less expensive, and income remains the same, describe the substitution and income effects that occur for travelling by car. A) If travelling by car is a normal good, the substitution effect would cause an increase and the income effect would cause a decrease in travelling by car. B) If travelling by car is a normal good, both the substitution and income effects would be cause an increase in travelling by car. C) If travelling by car is a normal good, the substitution effect would cause a decrease and the income effect would cause an increase in travelling by car. D) If travelling by car is a normal good, both the substitution and income effects would cause a decrease in travelling by car.
Based on the circular flow diagram, what two entities pay wages to households?
a. rest of the world and financial markets
b. government and financial markets
c. firms and government
d. firms and financial markets