In fair return pricing:
a. price is set equal to marginal cost.
b. the firm incurs economic losses.
c. the firm earns zero economic profit.
d. the firm earns zero accounting profit.
c
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After the Fed raises the federal funds rate, the effects on the economy can take up to two years before they occur. Is this statement accurate? Lay out the time path of how an increase in the federal funds rate affects the economy
What will be an ideal response?
One of the commonly used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the same in two countries, the proportions of their expenditures allocated to each product would be the
same as it is in the other country. Imagine that this assumption is false, and that in fact, the tastes in each country are strongly biased in favor of the product in which it has a comparative advantage. How would this affect the relationship between relative factor abundance between the two countries, and the nature (factor-intensity) of the product each exports? What if the taste bias favored the imported good?
Ceteris paribus, which of the following would cause a decrease in the demand for HD TVs, a normal good?
A. decline in the price of HD TVs. B. increase in the price of HD TVs. C. increase in consumers' income. D. decrease in consumers' income.
Under a floating exchange-rate regime, following an expansion in the money supply, the change in the value of domestic currency is most likely to
A. lower real domestic product. B. increase demand for exports. C. increase demand for imports. D. initiate foreign capital inflow.