You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. George, who is one of your advisors, says that the best way to avoid a shortage of oranges is to take no action at all. Charles, another one of your advisors, argues that without a binding price floor, a shortage will certainly
develop. Otto, a third advisor, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Which of your three advisors is most likely to have studied economics?
a. George
b. Charles
c. Otto
d. Apparently, all three advisors have studied economics, but their views on positive economics are different.
a
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What will be an ideal response?
Suppose buyers in the used car market are willing to pay $8,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 20% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
A. $7,000 B. $6,000 C. $5,000 D. $4,000
The value of a dollar:
A. is its purchasing power. B. remains constant over time. C. is its face value. D. is set by the government.
In the U.S. balance of payments, U.S. purchases of assets abroad are a(n):
A. U.S. dollar outflow. B. U.S. dollar inflow. C. current account item. D. inpayment.