Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:
a. people in Portugal will not want to buy as many hats.
b. Spain no longer has a comparative advantage in hats.
c. Portugal is flooding the market with too many doormats.
d. some of the gains from trade shift to Portugal.
e. some of the gains from trade shift to Spain.
d
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Which of the following is a reason to study the decisions of price takers?
a. While there are not many price-taker markets, these few markets dominate the economy. b. The decision making of both price searchers and price takers is identical. c. The price-taker model enhances our knowledge of competition as a dynamic process. d. Price takers are the most common type of business in the real world.
In game theory, behavior that results in cooperation as long as the other players continue to cooperate, is referred to as
A) nice behavior. B) tit-for-tat strategic behavior. C) simple behavior. D) opportunistic behavior.