If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then ________
A) each will produce a combination of goods that is within her/his production possibility frontier
B) they will lose because they are no longer able to produce and consume both goods
C) each will gain because each can consume a combination of goods that is outside her/his production possibility frontier
D) one of them will gain and the other will lose
C
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The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books?
A) The demand curve for new books shifts to the right. B) The supply curve for new books shifts to the left. C) The demand curve for new books shifts to the left. D) The supply curve for new books shifts to the right.
Cash payments are generally preferable to in-kind payments when the utility of the transfer recipient is the only criterion because _____
a. it is cheaper to distribute in-kind benefits b. cash is necessary for utility maximization c. recipients know their utility functions better than anyone else d. of diminishing marginal utility