A firm will shut down in the short-run if
a. P>AVC b
b. P
d. P
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A sudden appreciation in the exchange rate of a country deteriorates the terms of trade of the country
a. True b. False Indicate whether the statement is true or false
The cost effect implies that
A. Higher costs are reflected in higher average prices. B. The aggregate demand curve is downward-sloping. C. The aggregate supply curve is linear. D. Lower average prices result in greater quantity supplied.
Refer to the graph below, which shows the supply and demand for British pounds. D1 and S1 represent the initial demand and supply curves. If the supply of British pounds in the foreign exchange market shifts to S3, and the British government wanted to fix the exchange rate at its initial level, then it should:
A. Sell U.S. dollars out of its reserves
B. Buy U.S. dollars to add to its reserves
C. Sell British pounds in the foreign exchange market
D. Buy British bonds in the open market
If transactions costs are low, then assigning property rights in a market with external costs
i. increases the deadweight loss. ii. means private transactions are efficient. iii. means that only consumers must pay the external costs. A) i only B) ii only C) ii and iii D) i and iii E) i and ii