Homework #1 6) A) How does the provision of social security affect people incentive to save while they are working? There is a benefit offset for people who retire early. At age 62, I will start getting Social Security benefits (in two months). I can work and earn up to $12,600.00 without a reduction in SS benefits. On an actuarial basis, a person gets the same total amount of benefits if he retires early or after age 65. You just get lower payments, but for a longer period of time. I retired
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Chapter 3 Labor Productivity and Comparative Advantage: The Ricardian Model Copyright © 2012 Pearson Addison-Wesley. All rights reserved. Preview • • • • • • • • Opportunity costs and comparative advantage Production possibilities Relative supply, relative demand & relative prices Trade possibilities and gains from trade Wages and trade Misconceptions about comparative advantage Transportation costs and non-traded goods Empirical evidence Copyright © 2012 Pearson Addison-Wesley. All rights reserved
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argue on the evolvement of business since the 16th century. The theories are classical theories that derived from an economic perspective. There are 4 theories involved in country-based theories. They are Mercantilism Theory, Absolute Advantage Theory, Comparative Advantage Theory and Heckscher-Ohlin Theory. Firm-based theories attempt to explain business phenomena related to international trade. Mercantilism theory was the first theory of international business that emerged in England in the
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Unit 1 Individual Project Economic Concepts Lamar Dolby ECON220-1204B-04 Faime Moussavi October 7, 2012 Abstract Michelle and James are two people faced with opportunity cost decisions. They both can produce chickens and potatoes or one or the other. They both live in isolated regions but share the same resources. When faced with opportunity costs one has to decide what they have to give up in order to gain something they want. In the scenario Michelle can grow 200 potatoes per year or
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always less than the dollar value of the item. d. always greater than the cost of producing the item. 5. If Iowa’s opportunity cost of corn is lower than Oklahoma’s opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Iowa should import corn from Oklahoma. d. Oklahoma should produce just enough corn to satisfy its own residents’ demands. 6. Which of the following statements is not correct? a. Trade
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are considered to be international companies. Ricardo’s theory of comparative advantage states that unless a country has the same absolute advantage in producing all goods and services, there would be some goods and services in which it had less relative advantage. It would gain by importing those and exporting the ones in which it had an absolute advantage or the greatest relative advantage. Smith’s theory of absolute advantage is the one that is most enjoyed by a country because it can produce
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improve the efficiency and productivity in comparison to principal company which ultimately enhances the company’s performance. 2. What are the essential arguments in favor of free trade and against free trade? Favor Free Trade - Law of comparative advantage - Increased competition leads to lower prices for consumers - Open economies lead to increased technological development and innovation - Higher standard of living - Better understanding of nations Against Free trade - Free trade benefits
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person has the absolute advantage in which activities? Michelle has the absolute advantage in both activities because she can produce more potatoes and more chickens then James. 6. Which person has the comparative advantage in potatoes? Michelle has the comparative advantage of potatoes 200/50 = 4 pounds of potatoes per 1 chicken, where James is 80/40 = 2 pounds of potatoes per 1 chicken. 7. Which person has the comparative advantage in chicken? James has the comparative advantage in chicken 40/80
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Chapter 2 The Economic Problem 2.1 Production Possibilities and Opportunity Cost 1) The production possibilities frontier A) is the boundary between attainable and unattainable levels of production. B) is the boundary between what we want to consume and what we want to produce. C) shows how production increases as prices rise. D) shows prices at which production is possible and impossible. E) illustrates why there need not be any scarcity in the world. Answer: A Diff: 1 Type:
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Ricardo: The Intellectual Contributor The aim of this paper is to point out how the great thinker David Ricardo continued or answered some of the unresolved questions in Adam Smith’s theories. David Ricardo started off as a stockbroker then turned to an economist. He was a man who contributed to numerous areas of economic theory, including methodology, diminishing returns, rent, theories of value, and international trade. Ricardo began studying economics around 1799 at age 28, and published his
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