A flexible exchange rate is an exchange rate whose value:
A. reflects the comparative advantage of the home country versus other foreign countries.
B. is established annually by the International Monetary Fund.
C. varies according to supply and demand for the currency in the foreign exchange market.
D. is determined by the law of one price.
Answer: C
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John can make pizza at a lower opportunity cost than Allen, but Allen can make more pizzas per day than John. Therefore,
A) John has an absolute advantage in pizza. B) Allen cannot benefit from trade with John. C) John has a comparative advantage in pizza. D) John cannot benefit from trade with Allen. E) Allen has a comparative advantage in pizza.
Karl has a home business that consists of only himself and his computer. If he were to analyze his operations in the form of a long run production function his isoquants would
A. be straight lines with a negative slope. B. be concave from above. C. be L shaped. D. be straight lines with a positive slope.
A perfectly competitive firm is producing a good at a level where P = $30 and MC = $30. The firm will continue to produce in the short run as long as:
A. AVC is less than $30. B. AFC is less than $30. C. price does not increase. D. ATC is greater than $30.
In a free market, if the price of a good is below the equilibrium price, then;
A. buyers, hoping to ensure they acquire the good, will bid the price higher. B. sellers, dissatisfied with growing inventories, will raise their prices. C. the government will set a higher price to reestablish the market equilibrium. D. sellers, dissatisfied with growing inventories, will lower their prices.