Which of the following statements regarding the efficiency of monopolistic competition is FALSE?
A) Compared to a situation with total product uniformity, monopolistic competition might be efficient.
B) Resources are used efficiently when marginal social benefits equals marginal social cost.
C) Monopolistic competition is definitely inefficient because price exceeds marginal cost.
D) A greater degree of product variety creates a loss because the quantity produced is less than the efficient quantity.
C
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The demand for the Franconian franc in the foreign exchange market equals 14,000 - 3,000e and the supply of francs in the foreign exchange market equals 2,000 + 2,000e, where e is the nominal exchange rate expressed in U.S. dollars per franc. If the franc is fixed at 3 U.S. dollars per franc, then to maintain this fixed rate Franconia's international reserves must:
A. increase by 3,000 francs per period B. decrease by 9,000 francs per period C. increase by 9,000 francs per period D. decrease by 3,000 francs per period
Suppose the domestic supply (QS) and demand (QD) for skateboards in the United States are given by the following set of equations:
QS = -60 + 3P QD = 390 - 2P In the absence of international trade in skateboards, what will be the equilibrium price of skateboards in the United States? A. $66 B. $90 C. $45 D. $150
A good salesperson can sell $1,000,000 worth of goods, while a poor one can sell only $100,000 worth of goods. Job applicants know if they are good or bad, but the firm does not. A firm will offer job applicants a choice between a fixed salary of $25,000 or 20% commission. Assuming risk-neutral salespersons and the possibility of opportunistic behavior, will this choice of contracts allow the
firm to distinguish between good salespersons and bad ones before the hiring decision is made? What will be an ideal response?
The speculative attack on the British pound in 1967 succeeded because
A) the pound was seriously undervalued relative to the dollar. B) Britain decided to drop out of the Bretton Woods system. C) British exports greatly exceeded British imports, causing a large inflow of gold. D) the Bank of England lacked the international reserves to defend the existing exchange rate indefinitely.