Which of the following is true?
a. Anticipated inflation is an increase in the price level that comes as a surprise, at least to most individuals.
b. Unanticipated inflation is a change in the price level that is widely expected.
c. When the inflation rate is high and variable, decision makers will generally be able to anticipate year-to-year changes in inflation quite accurately.
d. Inflation will tend to increase the nominal values of both prices and wages.
D
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Suppose Canon Inc decided to invest 45 billion yen in developing and launching a new model of its digital camera, expecting that it will bring additional sales of 60 billion yen
The company has already invested 38 billion yen when the marketing department suddenly finds out that the introduction of a similar camera by Sony will reduce Canon's expected additional sales to 30 billion yen. The company's management is trying to decide whether to continue investing in the new product or close the project. Canon hires you as an economic consultant. So, think like an economist to help the company's management make their decision: a) At this point in time, what is Canon's marginal cost of introducing the new product? b) What is Canon's marginal benefit from introducing the new product? c) Will you advise Canon to finish the project and introduce the new product? Why or why not? What principles of economic thinking will help you analyze the situation and make the right choice?
Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. Has Tom made the best decision?
A. No, because he's earning an economic profit of -$6,000. B. Yes, because he's earning an accounting profit of $35,000. C. No, because his accounting profit is larger than his economic profit. D. Yes, because his accounting profit is larger than his economic profit.
The substitution bias in the consumer price index refers to the
a. substitution by consumers toward new goods and away from old goods. b. substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods. c. substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive. d. substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.
When regulations interfere with exchange and limit entry into various businesses and occupations, they will
What will be an ideal response?