Suppose that the demand for oranges increases. Explain the long-run effects of the guiding function of price in this scenario
What will be an ideal response?
In the long run, the higher price of oranges will signal more firms to enter the orange market, as it will seem more profitable than some other markets. As firms enter, supply increases, causing the price to fall relative to the short-run price and quantity to increase further. The higher short-run price has guided more resources into the market.
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If European incomes rose, European tariffs on U.S. goods decreased, or their tastes for American goods increased, Europeans would demand ____ U.S. goods, leading them to ____ their supply of euros to obtain the added dollars necessary to make those purchases. a. more; increase
b. more; decrease. c. fewer; increase. d. fewer; decrease.
Assume South Korea and Vietnam have the same amount of resources. In a given time period, South Korea can produce 100,000 jackets or 1,000,000 shirts. Vietnam can produce 200,000 jackets or 2,000,000 shirts. This means that
A. South Korea has an absolute advantage in jackets. B. South Korea has a comparative advantage in jackets. C. Vietnam has an absolute advantage in both jackets and shirts. D. Vietnam has a comparative advantage in shirts.