"When a person is more productive in producing a good or service than another person, the first person has the comparative advantage in producing the good." Is this assertion correct or incorrect? Explain your answer
What will be an ideal response?
The assertion is incorrect. The statement describes an absolute advantage, that is, a person has an absolute advantage in the production of a good if the person can produce more of it in a given time period than someone else. Comparative advantage, however, relies on a comparison of opportunity costs. A person has a comparative advantage in producing a good if the person can produce the good at a lower opportunity cost than another person.
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In 2003, the top 20 percent, or wealthiest fifth, of U.S. households earned _____.
(A) About the same as the bottom four fifths combined. (B) Less than the bottom four fifths combined. (C) More than the bottom four fifths combined. (D) Less than the bottom three fifths combined.
Which of the following is the most frequently used tool of monetary policy?
a. changing the discount rate b. changing reserve requirements c. open market operations d. interest rate changes