Ashley, who makes knitted caps, determines that her marginal cost of producing one more knitted cap is equal to $10. A consumer offers her $12 if she sells one more knitted cap to her. Ashley will:
Select one:
a. realize that her production is not profitable and shut down her business.
b. offer to sell 20 additional knitted caps, since it must be profitable.
c. sell the additional knitted cap, since the marginal revenue is greater than the marginal cost for the unit.
d. not sell the additional knitted cap, since she does not know what her total costs will be.
c. sell the additional knitted cap, since the marginal revenue is greater than the marginal cost for the unit.
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If Egypt has a chronic unfavorable balance of trade, it will eventually lead to
a. the Egyptian government's decision to appreciate its currency (the pound) b. the Egyptian government's decision to devalue its currency (the pound) c. the Egyptian government's policy to create a favorable balance of payments d. the Egyptian government's policy to create a favorable balance on current account e. a negative balance of payments
A government currently uses price controls to hold down the price of zinc, an exhaustible resource. If price controls are removed,
a. production of zinc will probably fall. b. zinc mines with high marginal cost of production will probably stop producing. c. consumers of zinc will probably want substitutes for zinc. d. income will probably be redistributed from zinc producers to zinc consumers.
Which of the following transactions represents a deficit in the current account of the US balance of payments?
a) the moscow capital investment corporation makes a loan to a US firm b) a US subsidiary exports raw materials to its french parent company c) US firms and individuals receive dividends on US investments in latin america d) US tourists in great britain purchase pounds sterling e) foreigners purchase US securities
Exhibit 15-6 Aggregate demand and supply model
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In Exhibit 15-6, if the aggregate demand curve is at AD3, the government should:
A. raise taxes to move to AD1. B. cut taxes to move to AD2. C. not change its behavior. D. cut spending to move to AD2.