Suppose that the United States and Italy both produce wine and shoes. In the United States, wine sells for $10 a bottle and shoes sell for $40 a pair. In Italy, wine sells for 15 euros a bottle and shoes sell for 20 euros a pair. If the current exchange rate is 0.8 euro to the dollar, then
A. the United States will import wine from Italy and Italy will import shoes from the United States.
B. Italy will import both shoes and wine from the United States.
C. the United States will import both shoes and wine from Italy.
D. the United States will import shoes from Italy and Italy will import wine from the United States.
Answer: D
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Answer the following statement(s) true (T) or false (F)
1. The copycat game does not have a pure strategy Nash Equilibrium. 2. When mixed strategies are allowed, the Copycat Game does have a Nash equilibrium. 3. Nash equilibrium is a normative concept. 4. For an outcome to be Pareto optimal, the players' total payoff must be as large as possible. 5. If either player is receiving his maximum payoff, then that outcome is Pareto optimal.
A dieter who prefers to eat small portions at his next meal, but chooses a large portion at mealtime when it arrives is:
A. dynamically consistent. B. dynamically inconsistent. C. exhibiting self-control. D. exhibiting a past bias.
To fully understand how taxes affect economic well-being, we must compare the
a. benefit to buyers with the loss to sellers. b. price paid by buyers to the price received by sellers. c. profits earned by firms to the losses incurred by consumers. d. decrease in total surplus to the increase in revenue raised by the government.
We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because
A) perfectly inelastic demand curves are rare. B) an inelastic demand curve may be perfectly inelastic at some times but not others. C) an inelastic demand curve may be elastic at low prices. D) there has never been evidence of a perfectly inelastic demand curve.