1. Joint output of individuals or nations will be maximized when goods are excha

Question

1. Joint output of individuals or nations will be maximized when goods are exchanged between parties in accordance with the law of "comparative advantage".

True

False

2. The law of supply states that there is a negative relationship between price and quantity demanded.

True

False

3. An increase in consumer income will affect the supply of any given product.

True

False

4. The production possibilities frontier assumes that the level of technology varies when applying the model.

True

False

5. The "Law of diminishing returns" states that as any activity is extended, it eventually becomes increasingly easier to pursue the activity further.

True

False

Explanation / Answer

1. True because nations will produce goods for which their cost is lower and they specialize. They can make higher profits and achieve greater output.

2. False - The statement is true for law of demand. Law of supply states that there is a positive relationship between price and quantity.

3. False - It will affect demand and not supply.

4. False - The production possibility frontier assumes that the state of technology is the same.

5. False - It becomes increasingly difficult and not easier

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