Based on Table 3.1, the pre-trade relative price of a computer in Mexico is
A) three pairs of shoes.
B) one pair of shoes.
C) one-half pair of shoes.
D) one-third pair of shoes.
A
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Each of the following is an example of moral hazard in which people modify their behavior in an opportunistic way, often frustrating the intent of governmental or management policies. Which is NOT an example of moral hazard?
a. After a firm gets a loan from a bank to purchase inventory, the borrower instead decides to use it to invest in call options on stocks. b. Based on motorcycle accident data, a state passes a law requiring motorcyclists to wear helmet, but then the motorcyclist wearing helmets start to drive faster and more recklessly. c. Bank and nonbank mortgage lenders make money granting loans. But the Government through Freddie Mac and Fannie Mae decides to purchase these loans. The mortgage lenders find that they earn a fee for each mortgage that they grant and then sell to Freddie Mac or Fannie Mae. Since they never intended on holding on to the mortgage, the mortgage granters are not too particular on whether the customer can really pay it back. The lowest quality loans are sold to the Government. d. A fellow buys a $1 million life insurance policy and then travels to Nepal to climb Mount Everest. e. A student learns that if he or she reads the chapter and studies lecture notes, the student does better on the next test.
Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will:
A. undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. B. undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent. C. not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. D. not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent.
The theory of monopolistic competition was developed in two separate models by
A) Adam Smith and David Ricardo. B) John Kenneth Galbraith and John Maynard Keynes. C) Edward Chamberlin and Joan Robinson. D) Roger Leroy Miller and Paul Samuelson.
Suppose at the current level of labor used, MRP = $20 and MFC = $20. To maximize profits, the firm should
A) hire more labor. B) reduce the level of labor. C) maintain the current level of labor. D) shut down.