People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?
A) Fresh fruit is not subject to the law of supply.
B) The supply of fresh fruit increases in the summer.
C) Fresh fruit is an inferior good.
D) Fresh fruit is not subject to the law of demand.
Answer: B
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Geographical conditions such as good climate, availability of natural resources, and fertile soil are examples of:
A) proximate causes of prosperity. B) implicit causes of prosperity. C) fundamental causes of prosperity. D) explicit causes of prosperity.
Suppose the government imposes a price support that is above the equilibrium price. As a result,
A) total revenue increases. B) consumer surplus increases. C) the marginal cost of the last unit produced decreases. D) the government has effectively imposed a price ceiling. E) the subsidy the government pays decreases.
What does it mean to say that a game is in "extensive form"?
A) Strategies are described, rather than just numbered. B) All payoffs are shown. C) The game is presented as a matrix. D) The game is presented as a decision tree. E) The game is written out as often as the situation calls for it to be played.
Why is monetary policy more effective in an open economy than in a closed economy?
a. Trade deficits affect exchange rates, which can offset adverse interest rate effects. b. Borrowers can choose to use foreign capital, so that interest rate effects are stronger than expected. c. Interest rate changes affect exchange rates, so that capital flows reinforce the effect of monetary policy. d. Banks can choose to lend to foreigners, so that interest rate effects are essentially nullified.