The natural monopoly in Figure 13.3 wants to charge a price of:
A. P1.
B. P2.
C. P3.
D. P4.
Answer: C
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The Bertrand model of price setting assumes that a firm chooses its price
A) independently of what price other firms charge. B) subject to what price rival firms are charging. C) so that joint profits are maximized. D) without considering the shape of the demand curve.
Suppose the price level falls. Because of fixed nominal wage contracts, firms become less profitable and they cut back on production. This is a demonstration of the
A. classical dichotomy theory of the short-run aggregate-supply curve. B. sticky-wage theory of the short-run aggregate-supply curve. C. misperceptions theory of the short-run aggregate-supply curve. D. sticky-price theory of the short-run aggregate-supply curve.
As an exchange rate regime, target zones would be classified as
A) splitting the difference between fixed and flexible. B) a flexible exchange rate policy. C) a fixed exchange rate policy. D) a currency basket.
Under a fixed exchange rate system, at high domestic real interest rates net capital outflows are ________, so the central bank ________ foreign-exchange reserves
A) positive; acquires B) positive; loses C) negative; acquires D) negative; loses