The rational expectations hypothesis indicates that people
a. pay little attention to policy when forming their expectations about the future.
b. expect the next period to be pretty much like the recent past, regardless of policy changes.
c. will always be able to forecast the future accurately.
d. change their expectations about the future if policy changes.
D
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The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Point c is Pareto efficient because
A) the MRS's are equal. B) the indifference curves are tangent. C) no mutual gains from trade exist. D) All of the above.
In the three months before a $1 per pack cigarette tax took effect in Alaska, smokers bought 175 million more cigarettes than during the same period a year earlier. What explains this behavior by consumers?
Which of the following statements is correct?
a. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.
A call option is in the money if the futures price is greater than the strike price.
a. true b. false