Author Question: The Haig-Simons definition of income and the Fisher definition of income are virtually identical. ... (Read 144 times)

nummyann · **on:** Jul 1, 2018

The Haig-Simons definition of income and the Fisher definition of income are virtually identical.

a. True b. False

Question 2

Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people.

What will be an ideal response?

bubulittle310@msn.cn · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

b

Answer to Question 2

One person, when she spends all of her time producing one good or the other, can produce more of either good than the other person. This person has an absolute advantage in producing both goods. However, gains from trade exist when the opportunity costs associated with each good are different for both people. If the costs of producing one good in terms of the forgone production of the other good differ for the two people, then they can gain from trade.