What are three reasons that the interest-rate parity condition may not always hold?
What will be an ideal response?
First, there may be differences in default risk and liquidity. Second, there are transactions costs which may prevent returns from being exactly equal. Third, it does not take into account exchange-rate risk.
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Dumping is defined as the situation in which
A) foreign producers sell a product at a price below the cost of production. B) domestic producers are protected by tariffs. C) domestic producers sell a product at prices below the cost of production. D) foreign producers sell a product at a price above a fair level. E) domestic producers cut production to drive up domestic prices.
Would the owner of a profit-maximizing fast-food establishment hire another worker for $55 per day if that worker added faster service, increasing sales and revenue by $50 per day? Why or why not?
Helen is a computer analyst earning $750,000 a year in New York and flies each winter weekend to Florida to bask in the sun. The price tag is $1,500 . Her cousin Fred is a nursery school teacher earning $35,000 a year in Chicago and spends his winter weekends going to avant-garde movie theaters. The price tag is $20 . Who gets the better deal? a. Helen gets the better deal because the marginal
utility of the Florida weekend is higher than the weekend of movies, regardless of the price tags. b. Helen gets the better deal because the ratio of marginal utility to price is higher than the ratio of marginal utility to price for a weekend of movies. c. Fred gets the better deal because the ratio of marginal utility to price is higher than the ratio of marginal utility to price for a Florida weekend. d. Using interpersonal comparisons of utility, it is clear that Fred gets the better deal because the difference in price overwhelms any difference in the marginal utility of aweekend of movies compared to a weekend in Florida. e. It is impossible to say who gets the better deal because we can't engage in interpersonal comparisons of utility.
Place point Q on the graph to indicate an unemployment rate of 100 percent, point R to indicate full employment and point S to indicate where the United States economy usually operates.
