Suppose a Starbucks tall latte costs $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?
a. both the euro area and Australia
b. the euro area but not Australia
c. Australia but not the euro area
d. neither the euro area or Australia
b
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The free-rider problem is triggered by being:
A. excludable and rival in consumption. B. excludable and nonrival in consumption. C. nonexcludable. D. rival in consumption.
The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:
A. total revenue is maximized. B. total cost is minimized. C. marginal cost is minimized. D. marginal revenue equals marginal cost.
Which of the following explains why big business typically spends more on rent-seeking activities than consumers?
A. Lobbying is a public good to consumers. B. Lobbying is a public good to businesses and labor unions in the involved firms. C. Labor unions in the involved firms. D. Lobbying is a public good to businesses.
The production of a wireless earbud involves 5 stages. The value added after the first stage of production occurs is $1.20. The sale price of the wireless earbud is $2.50. Based on the above information, what amount is used to measure GDP?
A. $3.70 B. $1.30 C. $2.50 D. $1.20