Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Suppose the government imposes a $2.00 per gallon tax on milk. The new general equilibrium price of cereal is:
A. $9.66.
B. $9.76.
C. $7.76.
D. $11.76.
A. $9.66.
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If a perfectly competitive firm's average total cost is less than the price, then the firm
A) incurs an economic loss. B) makes an economic profit. C) makes zero economic profit. D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.
A debtor nation means a nation
A) whose imports exceeds its exports. B) whose current account is less than its capital account. C) who—through its history—has invested less in the rest of the world than other countries have invested in it. D) whose current lending to the rest of the world exceeds its borrowing from the rest of the world.
A random walk model can more accurately predict exchange rates as compared to a sophisticated forecast
A) always. B) for forecasts up to a year away. C) for forecasts longer than a year away. D) never. E) because of the predictability of exchange rates.
Which of the following statements best describes the potential gains from trade?
a. The potential for gains from trade may be especially low among the smaller and lower income countries of the world. b. The potential for gains from trade may be especially high among the smaller and lower income countries of the world. c. The potential for gains from trade may be especially high among the medium and larger income countries of the world. d. The potential for gains from trade may be especially high among the smaller and medium income countries of the world.