Suppose there are only two goods: lettuce and grapes. In California, a head of lettuce sells for 50¢ and a bunch of grapes sells for $1. In Nebraska, 25¢ must be added to these absolute prices to cover transportation costs. How do these transportation costs affect the relative prices of lettuce and grapes?
a. The transportation costs do not affect the relative prices of lettuce and grapes.
b. The relative prices of lettuce and grapes are both higher when transportation costs are added.
c. The addition of transportation costs makes the relative price of grapes higher and the relative price of lettuce lower.
d. The transportation costs raise the relative price of lettuce but lower the relative price of grapes.
d. The transportation costs raise the relative price of lettuce but lower the relative price of grapes.
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Describe the field of economics known as microeconomics
What will be an ideal response?
During the delivery period,
A) the futures price exceeds the price in the cash market. B) the price in the cash market exceeds the futures price. C) the futures price and the price in the cash market are equal. D) there is no discernible relationship between the futures price and the price in the cash market.
Inflation targeting alleviates the problem of
a. money multiplier instability that makes money targeting difficult. b. time inconsistency. c. a lack of credibility in monetary policy. d. both b and c. e. all of the above.
In the graph below, as the consumer moves from indifference curve 1 to 3, his 
A. real and nominal income are falling, but he can buy more anyway. B. real income is falling, and his nominal income is rising. C. real income is falling and nominal income is constant. D. real income is rising and his nominal income is constant.