Other Economics Answers

6.

What difficulties arise in the use of community

indifference curves in trade theory? How can these

difficulties be overcome?

5.What does a community indifference curve measure? What are its characteristics? What does the

slope of an indifference curve measure? Why does it decline as the nation consumes more of the commodity measured along the horizontal axis?

4.

What is the reason for increasing opportunity costs?

Why do the production frontiers of different nations

have different shapes?

3. Why does a production frontier that is concave from

the origin indicate increasing opportunity costs in

both commodities? What does the slope of the

production frontier measure? How does the slope change as the nation produces more of the commodity measured along the horizontal axis? more

of the commodity measured along the vertical axis?

2. How are the tastes, or demand preferences, of a

nation introduced in this chapter? Why are they

needed?

The demand curve for product X is given by QX = 50 − 2PX. How much consumer surplus do consumers receive when PX = $5?

What effect will each of the following have on the demand for small automobiles

such as the Mini-Cooper and Smart car? Answer with graph.

i. Small automobiles become more fashionable.

ii. The price of large automobiles rises (with the price of small autos remaining

the same).

iii. Income declines and small autos are an inferior good.

iv. Consumers anticipate that the price of small autos will greatly come down in

the near future.

v. The price of gasoline substantially drops.

Which of the following is recorded in the U.S. balance of payments account? 1. foreign investment in the United States II. U.S. investment abroad III. the U.S. government deficit or surplus *

A) III only

OB) I and II

C) I and III

OD) I, II and III

Consider an economy with a flexible exchange rate and high capital mobility. The

government wants to raise income but does not want the exchange rate to change. Use IS/LM

framework to show how it must change its monetary and fiscal policies.

Show how an open market sale affects income and the interest rate when the exchange is

fixed and there is less than perfect capital mobility. How would perfect capital mobility alter

your answer?