Author Question: Assume that Germany can produce 10 million bottles of beer or 4 million bottles of vodka. Further ... (Read 368 times)

123654777 · **on:** Jun 30, 2018

Assume that Germany can produce 10 million bottles of beer or 4 million bottles of vodka. Further assume that Russia can produce 7 million bottles of beer or 3 million bottles of vodka. As a result, which of the following is true with regard to absolute and comparative advantage?
a. Germany has the absolute advantage in beer and the comparative advantage in beer.
b. Germany has the absolute advantage in beer and the comparative advantage in vodka.
c. Russia has the absolute advantage in beer and the comparative advantage in beer.
d. Russia has the absolute advantage in beer and the comparative advantage in vodka.

Question 2

The presence of a negative externality is likely to give rise to significant market failures when:
a. property rights are not well-defined.
b. property rights are well-defined.
c. there are few victims of pollution and few polluters.
d. transaction costs are relatively low.