Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination) and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination)
If trade occurs between these two countries, which should produce more food and which more clothing?
The U.S. has a comparative advantage in food, 5/10 < 4/6. Canada has a comparative advantage in clothing, 5/10 < 4/6. The U.S. should produce food and Canada should produce clothing.
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An increase in the price of a substitute shifts the demand curve to the _______
a. right b. left c. it does not change the demand curve d. none of the above
A farm is able to produce 5,000 bushels of peaches per season on 100 acres. Assume it adds one more acre and is able to produce 6,000 bushels per season. The marginal product of the additional acre of land for this farm is:
a. 6,000 bushels per acre per year. b. 5,000 bushels per acre per year. c. 1,000 bushels per acre per year. d. 11,000 bushels per acre per year.