Suppose that Home is a capitalabundant country. When Home trades with Foreign, a laborabundant country, the HO model predicts that the price of:
a. the laborintensive good will rise in Home.
b. the laborintensive good will rise in Foreign.
c. the capitalintensive good will rise in Foreign.
d. the capitalintensive good will fall in Home.
Answer: b. the laborintensive good will rise in Foreign.
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A free-rider problem exists if
A) those consuming the good pay more than the cost of providing the good so that the producer's profits increase ("free ride") as a result of the overpayment. B) those consuming the good pay nothing for it. C) two consumers can jointly consume a good, which lowers the price per person. D) a firm can obtain technology at a fair price.
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumption goods, is called: a. macroeconomics
b. positive economics. c. normative economics. d. microeconomics.