The difference between absolute and comparative advantage is that:

The difference between absolute and comparative advantage is that:
 a. absolute advantage refers to input cost, while comparative advantage refers to opportunity cost.
  b. absolute advantage refers to opportunity cost, while comparative advantage refers to input cost.
  c. absolute advantage is applicable only to individuals, and comparative advantage is applicable only to countries.
  d. absolute advantage is applicable only to countries, and comparative advantage is applicable only to individuals.
  e. absolute advantage is applicable to international trade, while comparative advantage applies to exchange of goods in the domestic market.

QUESTION 2

Suppose a mechanic uses 150,000 of his own money to start a business. The rate of interest he could earn in a savings account is 5 percent, and the rate of interest he could earn by investing in bonds is 8 percent. What is the opportunity cost of capital when the mechanic uses his money to start his own business?
 a. 7,500/year
  b. 8,000/year
  c. 19,500/year
  d. 12,000/year
  e. 150,000/year

QUESTION 3

In a perfectly competitive market, in response to a permanent increase 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 above, below or equal to the eventual long run equilibrium price.

QUESTION 4

Substitution of one commodity for another depends on all of the following factors, EXCEPT:
 a. prices of the goods available to the consumers.
  b. tastes and preferences of the buyers.
  c. the information buyers possess.
  d. market protocols.

QUESTION 5

For purposes of determining comparative advantage, the cost of producing a good in each of two countries is measured in terms of:
 a. metric units only.
  b. opportunity costs.
  c. total costs.
  d. the currency of the importing country.
  e. the currency of the exporting country.