Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?
What will be an ideal response?
Yes, a firm can have an absolute advantage without having a comparative advantage. A firm may be able to produce more of a good or service than its competitors, but that does not necessarily mean it can produce the good or service at a lower opportunity cost than its competitors.
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A sign that Country A is under pressure to devalue its currency is its:
a. Overall balance is in surplus. b. Financial account is in deficit. c. Overall balance is in deficit. d. Reserves account is in deficit (i.e., negative). e. All of the above.
Exhibit 14-1 Private and social cost
The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to:
A. voluntarily incur costs to reduce its pollution. B. produce at output rate Q3. C. produce at output rate Q2. D. produce at output rate Q4.