If the managers of your firm have bounded rationality, then
A) the firm should fire them and hire more competent managers.
B) a Nash equilibrium does not exist.
C) they are limited in their ability to calculate and may not succeed in maximizing profits.
D) it is not possible to maximize profits.
C
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The real business cycle theory is based on all of the assumptions below EXCEPT
A) flexible wages. B) flexible prices. C) pure competition. D) small menu costs.
How might a U.S. federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per U.S. dollar.)
A) A federal budget surplus raises interest rates, which raises exchange rates, and increases the balance of trade. B) A federal budget surplus reduces interest rates, which raises exchange rates, and reduces the balance of trade. C) A federal budget surplus raises interest rates, which raises exchange rates, and reduces the balance of trade. D) A federal budget surplus reduces interest rates, which reduces exchange rates and increases the balance of trade.
In general, as productivity levels decrease, the potential for productivity growth
a. decreases. b. increases. c. remains the same. d. decreases if GDP decreases.
Figure 16.4The pollution tax in Figure 16.4:
A. increases equilibrium output. B. decreases equilibrium price. C. gives the firm an incentive to switch to a cleaner production process. D. All of these