The real risk-free interest rate is equal to:
a. Society's time preference for money.
b. The tradeoff that society must make between buying a foreign or domestic product.
c. For most nations, the rate at which financial institutions can borrow from each other when the expected inflation rate is equal to zero.
d. None of the above is correct.
.A
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An explicit cost is
A) a cost specifically related to government rules and regulations. B) a cost unique to corporations. C) a nonmonetary opportunity cost. D) a cost that involves spending money.
Cruise liners offer last minute deals because
a. The marginal cost is higher than the marginal revenue since fixed costs are sunk b. The marginal costs of an additional passenger are very low at that point and companies gain by lowering prices c. The average cost of an additional passenger is very low at that point and companies gain by lowering prices d. All of the above
Rational individuals prefer to consume goods during the current year rather than in the future because of:
a. positive time preference. b. positive consumption preference. c. high expected rate of inflation. d. high market rate of interest.
Suppose that Burkina Faso, a nation in Africa, can produce cotton and medicinal plants and that the opportunity cost of producing one bale of cotton is two medicinal plants. Suppose that a neighboring nation, Togo, can produce those goods as well and that the opportunity cost of one bale of cotton is two medicinal plants. How would trade affect each country?
a. Burkina Faso will specialize in cotton while Togo will specialize in medicinal plants. b. Burkina Faso will specialize in medicinal plants while Togo will specialize in cotton. c. Two thirds of Burkina Faso's production will be in cotton while one third of Togo's production will be in medicinal plants d. Two thirds of Togo's production will be in cotton while one third of Burkina Faso's production will be in medicinal plants e. Nothing will change.