The antebellum period was characterized by many changes in tariff rates. What best describes the effect of removing a tariff on foreign cotton textiles?
a. The total supply curve of textiles would shift back.
b. The price of both foreign-made and domestic-made textiles would decrease.
c. The price of foreign-made textiles would decrease and the price of domestic-made textiles would increase.
d. The total (foreign and domestically produced. quantity of textiles purchased in the US would decrease.
e. The real income of textile consumers would decrease.
b. The price of both foreign-made and domestic-made textiles would decrease. (Note: This is the exact opposite of the problem in the Economic Insight).
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The inputs used to produce cupcakes (e.g., flour, sugar, butter, and labor) are also used to produce cookies, cakes, muffins, pies and many other goods. This suggests that:
A. the elasticity of supply of cupcakes is relatively low. B. cupcakes are a normal good. C. the supply curve for cupcakes is downward sloping. D. the elasticity of supply of cupcakes is relatively high.
Consider the Battle of the Sexes game:
Jim- wrestling Jim - opera Joan - wrestling 2, 1 0, 0 Joan - opera 0, 0 1, 2 Suppose both players use mixed strategies for this game. Jim chooses wrestling with probability 0.9, and Joan chooses wrestling with probability 0.5. What are the expected payoffs for the players? A) The expected payoffs are 0.95 for Joan and 0.55 for Jim B) The expected payoffs are 0.55 for Joan and 0.95 for Jim C) The expected payoffs are 0.95 for both players D) The expected payoffs are 0.55 for both players
Chad's income went from $1000 per week to $1500 per week. As a result he increased his consumption of steak from 1 pound a week to 3 pounds a week. Based on his consumption patterns, the income elasticity of steak for Chad is
A) 2.50. B) -.50. C) .50. D) -1.50.
Suppose in 1992, the average price level in Pacifica was 100, and that in Atlantica it was also 100. In the foreign exchange market 1 Pacifica pound was exchanged for 1 Atlantica mark. In 2012, the price level in Pacifica had risen to 280 and the price level in Atlantica had risen to 360.a. According to the relative purchasing power parity (PPP) theory, what should the pound-mark exchange rate be in 2012?b. If the actual pound per mark exchange rate is 0.5 pound/mark in 2012, is the mark overvalued or undervalued relative to its PPP value?
What will be an ideal response?