Define comparative advantage and discuss its role in international trade
What will be an ideal response?
Comparative advantage is the factor that drives international trade. A country has a comparative advantage in the production of a good if the country can produce it at a lower opportunity cost than any other country. Because the cost of production of a good is lower in the nation with the comparative advantage in the good, that country will export the good. The country will then gain by buying the goods from other nations that those nations produce at the lowest opportunity cost, that is, those goods in which the other nations have a comparative advantage.
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The desired reserve ratio is 10 percent. Joe deposits $1,000 in Bank A. Bank A keeps its minimum desired reserves and lends the excess to Fred. Fred spends his loan at J.C. Penney. J.C. Penney deposits the check it receives from Fred in Bank B
Bank B keeps its minimum desired reserves and lends the excess to Mary. How much can Bank B lend to Mary? A) $900 B) $90 C) $810 D) $100 E) $1,000
If a market is shared equally by 200 firms the Herfindahl-Hirschman Index is
A) 12.5. B) 25. C) 50. D) 200.