If Spain is capable of producing either tapas or soccer balls or some combination of those two products, then Spain should:
A. produce the good it has an absolute advantage in producing.
B. produce the good it has a comparative advantage in producing.
C. remain self-sufficient if it can produce both efficiently.
D. trade only if it possesses the absolute advantage in the production of both goods.
B. produce the good it has a comparative advantage in producing.
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For each of the following changes, what happens to the real interest rate and output in the long run, after the price level has adjusted to restore general equilibrium? How would the results differ, if at all, between the classical and Keynesian
model? Draw a diagram for each part to illustrate your result. (a) Wealth rises. (b) Money supply rises. (c) The future marginal productivity of capital increases. (d) Expected inflation declines. (e) Future income declines.
A socially optimal equilibrium occurs when: a. the marginal social cost of a given level of output is equal to the marginal social benefit. b. the marginal private cost of a given level of output is equal to the marginal social benefit. c. the marginal revenue from a unit of a good equals the marginal cost of production
d. the average revenue from a unit of a good equals the marginal cost of production.