If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,
a. the real exchange rate is above its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
b. the real exchange rate is above its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.
c. the real exchange rate is below its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
d. the real exchange rate is below its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.
b
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Predatory pricing, as defined in the text, is
A) common and profitable but illegal. B) common, profitable, and legal. C) common but both unprofitable and illegal. D) common and legal but unprofitable. E) rarely observed though often alleged.
We run a trade ________ on goods and a trade _________ on services.
A. deficit; deficit B. surplus; surplus C. surplus; deficit D. deficit; surplus
Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot can offer their hammer for a minimum of $7. Lace Hardware can offer the hammer for a minimum of $10. Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described, if the market price of hammers was $10, then:
A. only House Depot would gain surplus by supplying hammers to the market. B. House Depot, Lace Hardware, and Bob's Hardware would all supply hammers to the market, but Bob's would lose surplus. C. only House Depot and Lace Hardware would gain surplus by supplying hammers to the market. D. only House Depot and Bob's Hardware would supply hammers to the market.
Suppose the firms in a monopolistically competitive market are incurring economic losses. What will happen to move the market to its long-run equilibrium?
A) More close substitutes will appear in the market until economic profits are zero. B) The firms that dropped out of the market will reenter once the level of economic losses is zero. C) Firms will continue to exit the market until economic losses are equal to zero. D) The demand functions of all the firms remaining in the market will become relatively more elastic.