In the presence of asymmetric information,
A) all contracts are efficient.
B) efficiency in risk bearing cannot be achieved.
C) a trade-off exists between risk-bearing efficiency and production efficiency.
D) no contracting will take place.
C
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This question concerns the mechanism of a reserve currency standard. Two countries, X and Y, have two currencies, x and y, fixed to the reserve currency, the U.S. dollar. Suppose the exchange rate between x and the U.S. dollar is 3x per dollar
Suppose the exchange rate between y and the U.S. dollar is 5y per dollar. Explain (using numbers) the mechanism if the x-y exchange rate was 0.5 x per y.
Supporters of a floating exchange rate cited all of the following as advantages over the Bretton Woods system EXCEPT
A) each country would be able to choose its own long run inflation rate. B) parity changes and speculative attacks would no longer be possible. C) countries would be forced to work cooperatively in deciding monetary policy. D) exchange rates would be set symmetrically in foreign markets rather than by government decision. E) governments would not need to export inflation to decrease domestic unemployment.
Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers it produces 90 units of output. Fixed cost of production are $6 and the variable cost per unit of labor is $10 . The marginal product of the seventh unit of labor is 4 . Given this information, what is the total cost of production when the firm hires 7 workers?
a. $66 b. $76 c. $906 d. $946
The majority of proven world oil reserves are
A. under Alaska. B. held by non-Persian Gulf OPEC members. C. in the Persian Gulf region. D. in the former Soviet Union.