Which of the following statements about competition in a market is true?
A) Competition forces firms to outsource the production of their labor-intensive products.
B) Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible.
C) Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
D) Competition forces firms to add only low profit margins to their costs of production.
Answer: C
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The discount rate is the interest rate that
A) commercial banks charge their customers. B) commercial banks charge each other for the loan of reserves. C) the Fed charges the government for loans. D) the Fed charges commercial banks when it loans reserves to the banks. E) the Fed pays commercial banks on their reserves held at the Fed.
The following is NOT an example of a potential monitoring solution to moral hazard
a. blocking social network sites on company computers b. termination for failing to show up to work during the probationary period c. GPS tracking devices in repair trucks d. listening in on call center conversations
Which of the following statements about unanticipated inflation is true?
a. It reduces average purchasing power in the economy. b. It reduces total purchasing power in the economy. c. It redistributes purchasing power in the economy. d. It reduces nominal wages. e. Its effects are spread evenly throughout the economy so that no one gains or loses from inflation.
Overshooting occurs because:
a. expectations adjust slower than prices. b. expectations adjust at the same rate as prices. c. expectations adjust faster than prices. d. expectations do not adjust.