Referring to the previous question, which of the following best describes the adjustment to the new market equilibrium?
A) Price would fall, causing quantity supplied to decrease until the new equilibrium is reached.
B) Price would rise, causing quantity supplied to increase until the new equilibrium is reached.
C) Price would fall, causing quantity supplied to increase until the new equilibrium is reached.
D) Price would rise, causing quantity supplied to decrease until the new equilibrium is reached.
B
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In the text, U.S. and Mexico specialize in the production of corn and oil, respectively. They trade and both end up with more corn and oil. How much each gains from trade depends on
a. who has the comparative advantage b. who has the absolute advantage c. how efficiently the U.S. and Mexico produce corn and oil d. the import/export ratio e. the price of oil in terms of corn
Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that
a. he dislikes U.S. foreign policy. b. the Irish bonds pay a higher rate of interest. c. the U.S. government is more stable than the Irish government. d. None of the above provide an economic reason for buying the riskier bond.