Second Attempt Competency 5

What is the fundamental basis for trade among nations?

Comparative Advantage

In the economy, goods and services are purchased by

Households, firms, and the government

Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in

Mexican GDP, but not US GDP

Which of the following is included in the calculation of GDP?

The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.

When the price falls from P2 to P1 producer surplus

decreases by an amount equal A+B

Gross domestic product measures

income and expenditures

The term economists use to describe a situation in which the economy's overall price level is rising is

inflation

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,

market prices

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

maximizes the combined welfare of buyers and sellers.

When the demand for a food increases and the supply of the good remains unchanged, consumer surplus

may increase, decrease, or remain unchanged.

Assume, for Vietnam, that the domestic price of textiles without international trade is higher than the world price of textiles. This suggests that, in the production of textiles,

other countries have a comparative advantage over Vietnam and Vietnam will import textiles.

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters

When the nation of Duxembourg allows trade and becomes an importer of software,

residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises.

A supply curve can be used to measure producer surplus because it reflects

sellers' costs.

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

will import almonds

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero