1.2 MICROECONOMICS

Which of the following is a principle concerning how people interact?

• Markets are usually a good way to organize economic activity.

• Rational people think at the margin.

• People respond to incentives.

• All of the above are correct.

Which is the most accurate statement about trade?

• Trade can make every nation better off.

• Trade makes some nations better off and others worse off.

• Trading for a good can make a nation better off only if the nation cannot produce that good itself.

• Trade helps rich nations and hurts poor nations.

The principle that "trade can make everyone better off" applies to interactions and trade between

• families.

• states within the United States.

• nations.

• All of the above are correct.

The principle that trade can make everyone better off applies to

• individuals.

• families.

• countries.

• All of the above

Which of the following statements about trade is false?

• Trade increases competition.

• With trade, one country wins and one country loses.

• Bulgaria can benefit, potentially, from trade with any other country.

• Trade allows people to buy a greater variety of goods and services at lower cost.

Trade between the United States and Guatemala

• benefits both the United States and Guatemala.

• is a losing proposition for the United States because Guatemalan labor is less expensive than U.S. labor.

• is a losing proposition for Guatemala because capital is much more abundant in the U.S. than in Guatemala.

• is a losing proposition for Guatemala because U.S. workers are more productive than Guatemalan workers.

England can benefit from trade

• only with nations that can produce goods England cannot produce.

• only with less developed nations.

• only with nations outside of Europe.

• with any nation.

If Switzerland chooses to engage in trade, it

A country can benefit by trading with any other country.

• can benefit by trading only with countries that are less developed.

• cannot benefit if it trades with less developed countries.

• should first attempt to produce the good itself.

• can benefit by trading with any other country.

If the United States decides to trade with Yemen, we know that

• Yemen will benefit, but trade with a less developed country could not benefit the United States.

• it will not benefit Yemen because workers in the United States are more productive.

• Yemen and the United States can both benefit.

• it will not benefit either country because their cultural differences are too vast.