Imagine you are a buyer in a double oral auction with a reservation value of $10 and there is a seller asking $8
a. How much will you gain from accepting this offer?
b. If you are the only buyer, and you know that the lowest ask price is $2, should you accept this offer?
a. By accepting this offer, you will gain $2 ($10 – $8).
b. Yes. By accepting this offer, you will gain $8 ($10 – $2). If you choose to accept an offer from a different seller, your surplus will be lower. By accepting the lowest ask price of $2, you will maximize your surplus from this trade.
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Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. What will be the quantity of imports?
A) Q0 B) Q1 C) Q2 D) Q2 - Q0
Which of the following statements is the MOST accurate about the Law of One Price on Scandinavian ferry lines?
A) Due to menu costs, the Law of One Price does not hold. B) To avoid arbitrage opportunities, the Law of One Price must hold. C) Transaction costs of exchanging currency causes the Law of One Price to fail. D) Transportation costs between ferry lines leads to a violation of the Law of One Price. E) The physical distance allowed the Law of One Price to hold.
Clarence is a Japanese citizen working for Toyota at the manufacturing plant located in Tennessee. Clarence's work will contribute toward:
A. U.S. GDP since the location of the plant is in the U.S. B. Japan's GDP since he's a Japanese citizen. C. Japan's GDP since it's a Japanese firm. D. both the U.S. and Japan's GDP.
The fact that we observe a trade-off between risk and return is puzzling to economists, because that observation conflicts with the notion that most people are risk averse
a. True b. False Indicate whether the statement is true or false