I. it produces the good at a lower opportunity cost than another nation. II. it
ID: 1161246 • Letter: I
Question
I. it produces the good at a lower opportunity cost than another nation.
II. it produces the good using fewer resources than the other nation.
III. it produces the good more efficiently than another nation.
I. it produces the good at a lower opportunity cost than another nation.
II. it produces the good using fewer resources than the other nation.
III. it produces the good more efficiently than another nation.
2. In the circular flow diagram businesses buy goods and services from the product market. households buy goods and services from the product market. businesses provide goods and services to the factor market. households buy goods and services from the factor market. businesses buy goods and services from the factor market.
Explanation / Answer
1. A nation has a comparative advantage when
I. it produces the good at a lower opportunity cost than another nation.
III. it produces the good more efficiently than another nation.
So correct option is a) I and III.
it is by definition of comparative advantage.
II. is incorrect because when the nation produce good from fever resources than other nation. It means that the nation has absolute advance not comparative advantage.
2. In the circular flow diagram,
(B)household buys goods and services from the product market. So correct ans is B).
Explaination:
Households are main buyer of goods and services from products market whereas business provide goods and services to the product market.
Other options are incorrect :
Option a) is incorrect because business provide goods and services to product market not buy it.
Option C) is incorrect because business provide cost of production to factor market not goods and services.
Option D) is incorrect because household buy goods and services from product market not from factor market.
Option E) is incorrect because business buy factor of production from factor market not goods and services.
3.A decrease in savings in the United States would
a) decrease investment causing economic growth to decrease.
Explaination: In any economy whether is the economy like US which save very less or the economy like India which save very high, the role of saving is important in the economic growth.
We know that saving = investment, so as saving falls the investment also falls and as investment goes down it lead to fall in the economic growth.
So correct ans is a).
Other options are incorrect because as savings falls investment falls and as investment fall it leads to fall in the capital investment also, so due to saving investment falls then due to fall in investment, capital investment. That's why option b) is incorrect.
Option C) is incorrect because if saving falls investment falls not increase.
Option D) and option E) are incorrect because due to fall in saving the investment fall which result in decrease in capital investment not increase in capital investment.