When a person is more productive in producing a good or service ...

[Frost2351]

When a person is more productive in producing a good or service than another person, the first person has the comparative advantage in producing the good. Is this assertion correct or incorrect? Explain your answer.
 
  What will be an ideal response?

Question 2

If the marginal tax rate is high enough, the expenditure multiplier can be negative. Is the previous statement correct or incorrect?
 
  What will be an ideal response?

[orangecrush]

Answer to Question 1

The assertion is incorrect. The statement describes an absolute advantage, that is, a person has an absolute advantage in the production of a good if the person can produce more of it in a given time period than someone else. Comparative advantage, however, relies on a comparison of opportunity costs. A person has a comparative advantage in producing a good if the person can produce the good at a lower opportunity cost than another person.

Answer to Question 2

The statement is incorrect. The higher the marginal tax rate, the smaller the expenditure multiplier, but the expenditure multiplier always remains positive.