Suppose that the United States and Spain both produce cognac and handbags. In the United States, cognac sells for $20 a bottle and handbags sell for $80. In Spain, cognac sells for 30 euros a bottle and handbags sell for 40 euros. Given this information, trade will flow in both directions if the price of a dollar is between
A. 0.67 and 2.0 euros.
B. 0.5 and 0.75 euro.
C. 2.0 and 3.0 euros.
D. 1.5 and 2.5 euros.
Answer: A
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A) likely; aggregate demand is vertical in the long run B) unlikely; lower wages reduce productivity and morale C) likely; output prices always fall during recession D) unlikely; output and input prices generally fall during recession
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A) bid rigging B) market division C) price fixing D) recoupment
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