If U.S. inflation is 2%, Japanese inflation is 1%, and Mexican inflation is 3%, which of the following is true according to the theory of purchasing power parity?
A) The dollar should rise by 1% versus the yen and fall by 1% versus the peso.
B) The dollar should rise by 1% versus the peso and fall by 1% versus the yen.
C) The dollar should rise by 1% versus both the peso and the yen.
D) The dollar should fall by 1% versus both the peso and the yen.
A
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Refer to Price Ceiling. Area B + D represents
The following questions refer to the accompanying diagram which shows the effects of a price ceiling. The initial price and quantity are P0 and Q0, respectively, and the price ceiling is imposed at the price P1. Assume that none of the potential deadweight loss can be avoided.
a. the deadweight loss due to the price ceiling.
b. the fall in consumers' surplus caused by the imposition of the price ceiling.
c. the value of the time and resources spent by consumers to acquire the limited supply.
d. the post-ceiling profits earned by the producers of the good.
Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000 . If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?
a. c and d. b. Extra profit is zero. c. Extra profit is enough to cover half of the fixed cost of your next trip. d. Extra profit is enough to cover all of the variable costs of your next two trips. e. Extra profit is $45,000.
If a good has an elastic demand, then:
A. a small percentage change in price will cause virtually no change in quantity demanded. B. any percentage change in price will cause an almost immediate response in quantity demanded. C. a large percentage change in price will cause a smaller change in quantity demanded. D. a small percentage change in price will cause a larger percentage change in quantity demanded.
The problem of overfishing in waters that are commonly owned can be solved by
A) the use of the Coase Theorem. B) establishing property rights for fishing in the waters. C) subsidizing fishing. D) allowing the market to ration fish.