11. Which of the following is a positive statement? A. Individuals ought to make
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11. Which of the following is a positive statement? A. Individuals ought to make good long-term decisions B. Corporations should maximize shareholder value. C. The most important effects of policy happen in the short run. D. Government should reduce taxes E. The unemployment rate is 42%. 12. Which of the following may cause the demand curve for cigarettes to shift to the right? A. A public education campaign on the risks of smoking. B. The price of cigarettes decreases. C. The price of cigarettes increases D. The price of electronic (vapor) cigarettes increases. E. A reduction in government subsidies paid to tobacco farmers. 13. The Reach, ruled by House Tyrell and Dorne, ruiled by House Martell, are two kingdoms in Westeros. The following table describes their maximum output per year, in Wine and Bread, respectively. Put it differently, the numbers reported represent the end points (intercepts) of their individual, linear PPF. Which of the following statement is TRUE? Wine 10 6 Bread 5 2 Reach Dorne A. Dorne has absolute advantage in both Wine and Bread. B. Reach has comparative and absolute advantage in Wine. C. Dorne has comparative advantage, but NOT absolute advantage in Wine. D. Reach has comparative advantage, but NOT absolute advantage in Wine. E. Reach has absolute advantage, but NOT comparative advantage in Bread. 14. The specialization and international trade was: economist who proposed the theory of comparative advantage, as a basis for A. David Ricardo B. John Maynard Keynes C. George Akerlof D. Milton Friedman E. Adam SmithExplanation / Answer
11) Option E is a positive statement because it reflects a market fact and not a value based judgement as in the case of Normative statments
12) Option D. Since e-cigarettes and cigarettes are substitutes, when the price of the former increases, the sales are reduced and so the quantity demanded of the latter is increased as demand shifts right.
13) The opportunity cost of producing wine in Reach is 5/10 = 0.5 loaves of bread and the same in Dorne is 2/6 = 0.33. This gives an indication that there is a comparative advantage lie with Dorne in the production of wine. Also there is a comparative advantage in production of bread lying with Reach. It also has absolute advantage in both goods. Option C is correct
14) Option A
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