Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?
a. France has an absolute advantage in producing lemons.
b. Italy has a comparative advantage in producing potatoes.
c. Italy would be willing to trade one lemon for anything greater than one potato.
d. Both countries would be willing to trade at a rate of one lemon for one potato.
e. France has a comparative advantage in producing lemons.
c
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Most economists believe that there are positive externalities associated with education. If they're right, the market for education fails to provide an efficient or socially optimal allocation of resources because the equilibrium
a. price and quantity would be too high b. price would be too low and quantity would be too high c. price and quantity would be too low d. price would be too high and quantity would be too low e. price and quantity would be just right