Discuss some of the reasons behind downward stickiness of wages and prices
Empirical evidence supports several explanations for the downward stickiness of wages and prices. Firms may not be able to legally cut wages because of long-term labor contracts or a legal minimum wage. Efficiency wages may also limit a firm's ability to lower wage rates. Menu costs may cause price inflexibility as well.
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A cartel
a. consists of two firms that collude to eliminate product differentiation so that they can sell their goods as identical goods b. is a group of firms that collude to limit competition within their market c. refers to the breakup of a firm into two or more firms where each produces a good that does not compete against the others d. is a government-supported merger of two or more firms to improve the nation's advantage in international trade e. is an illegal merger of two firms that produce unrelated goods
Suppose the market for Mexican food in your neighborhood was in equilibrium.a. Draw a diagram showing the demand and supply curve for Mexican food. Indicate the market equilibrium quantity and price in this market.b. Suppose the government imposed a binding price ceiling in this market, with the goal of making Mexican food affordable to most residents. Add the price ceiling to your diagram, and then identify the quantity demanded and quantity supply in this market with the price ceiling.c. Would the government be able to make Mexican food affordable to most people with the price ceiling? Explain your answer using the diagram you drew in part (b).
What will be an ideal response?
A $600 investment has the following payoff frequency: a quarter of the time it will be $0; three quarters of the time it will pay off $1000. Its standard deviation and value at risk respectively are:
A. $433; $600 B. $0; $1,000 C. $433; $1,000 D. $750; $600
A star basketball player signs a contract that newspaper reports indicate is worth $10 million. The player receives $2 million upon signing, and $2 million every year for four years. The contract is worth
A. less than $10 million since the present value of $2 million received one or more years from now is less than $2 million. B. $10 million as reported in the press. C. some amount around $10 million. To determine whether it is more or less than $10 million we need to know whether the interest the player can earn is more or less than the market rate of interest. D. more than $10 million since the present value of $2 million received one or more years from now is more than $2 million.