A farmer has a comparative advantage at growing wheat if his cost of growing wheat is
smaller than his cost of growing any other crop.
Economic models of markets generally treat prices as exogenous variables.
For a given quantity, a monopoly’s marginal revenue is always greater than the price
associated with that quantity.
An outcome that is Pareto optimal is preferred by both players to all other possible
outcomes.
It would be irrational to promise to make an infinite number of payments in exchange
for a finite amount of goods.
Even when econometric equations predict very well, they can be entirely useless as
guides to policy.
A higher demand for capital implies a lower supply of current consumption.
Consider the following:
An easy, but not very insightful, possible explanation for apparently irrational behavior
is that it is rational for a people with a taste for the behavior.
The substitution effect insures that anytime there is a change in the price of a good, the
quantity demanded along a compensated demand curve also changes.
The market interest rate equals the absolute slope of the representative agent’s
indifference curve at the endowment point, minus 1.
A country will gain from international trade whenever the world relative price differs
from the autarkic relative price.
If the consumer’s income doubles, then his optimal purchases of all goods will double.
If a Laspeyres price index reports a 10% rise in the cost of living, then a person needs at
least a 10% rise in income to maintain the same level of satisfaction.
Suppose labor is a variable input and capital is a fixed input, and consider a firm’s
short-run average, average variable, and marginal cost curves.
What claim is made by the Ricardian Equivalence Theorem? Why must it hold in a
simple economy? If it fails to hold for our economy, what do economists expect the
reason(s) may be?
The doctrine of Respondent Superior contends that an employer is sheltered from torts
committed against his employees.
Economists focus only on real world consumer choices.