If two countries each are currently producing two goods, and each ...

[c0205847]

If two countries each are currently producing two goods, and each begins to specialize in the good in which it has a comparative advantage, what will happen to total world output?
 a. It will increase.
 b. It will decrease.
 c. It will be unchanged in both countries.
 d. It will rise in one country, and fall in the other, but the total is unchanged.

Question 2

Nick owns a dog whose barking annoys his neighbor Jane. Suppose that the benefit of owning the dog is worth 500 to Nick, and that Jane bears a cost of 700 from the barking. Assume that the city has no ordinance against barking dogs. A possible private solution that would benefit both parties is for:
 a. Jane to pay Nick 450 to get rid of the dog.
 b. Nick to pay Jane 650 for her inconvenience.
 c. Jane to pay Nick 650 to get rid of the dog.
 d. There is no private solution that would improve this situation for both parties.

[bigcheese9]

Answer to Question 1

a

Exhibit 18-3

Answer to Question 2

c

[c0205847]

Gracias!

[momolu]

Excellent