Countries import goods in which they have:
a. an absolute advantage.
b. a comparative advantage.
c. a reputation for good product quality.
d. a comparative disadvantage.
e. a surplus domestic production.
QUESTION 2An affordable housing law will affect a city's housing prices only if:
a. the demand for houses in the city is downward sloping.
b. the demand for houses in the city is almost horizontal.
c. the demand for houses in the city is almost vertical.
d. the demand for houses in the city is backward bending.
QUESTION 3Nancy owns and operates a drug store that generates total revenues worth 30 million in a particular year. Her accounting costs for the year are 25 million. She could have earned 3 million in this year, if she had worked as a consultant for a pharmaceutical firm. Further, she could have earned 5 percent interest on 40 million of her own money that she invests in the business this year. Nancy's accounting profit in this year is _____ and her economic profit is _____.
a. 5 million; zero
b. 5 million; 3 million
c. 5 million; 8 million
d. zero; 3 million
e. 3 million; 43 million
QUESTION 4In a perfectly competitive market, in response to a permanent decrease in demand:
a. the short run equilibrium price will be higher than the eventual long run equilibrium price.
b. the short run equilibrium price will be lower than the eventual long run equilibrium price.
c. the short run equilibrium price will be the same as than the eventual long run equilibrium price.
d. we cannot know whether the short run equilibrium price will be below the eventual long run equilibrium price.
QUESTION 5Which of the following was an effect of the affordable housing law in the cities Palo Alto, Laguna Beach, and Irvine?
a. It imposed a per-unit tax on builders of mid-range houses.
b. The law had a significant impact on the mid-range houses.
c. It imposed a per-unit tax on builders of expensive new houses.
d. The law had a significant impact on the supply of mid-range houses.
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