Suppose the value of the CPI is 1.100 in year one, 1.122 in year two, and 1.133 in year three. Assume also that the price of computers increases by 3% between year one and year two, and by another 3% between year two and year three. The price level is increasing, the inflation rate is ________, and the relative price of computers is ________.
A. increasing; increasing
B. decreasing; increasing
C. increasing; decreasing
D. decreasing; decreasing
Answer: B
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Which of the following situation would make transaction costs too high to negotiate and therefore the Coase Theorem would not apply?
A. Only a few people are bothered by the pollution in the area B. Many people are bothered by pollution in the area C. Many firms are in the area with different levels of pollution D. One firm is the cause of the pollution
Whenever a consumer purchases good X but not good Y, then:
A. MRSXY ? PX/PY at the chosen bundle. B. MRSXY ? PX/PY at the chosen bundle. C. MRSXY = PX/PY at the chosen bundle. D. MRSXY = - PX/PY at the chosen bundle.
If Samsung sells TVs at a higher price in the United States than in Korea, and if there is no cost difference in producing or transporting the TV sets, Samsung would be practicing
A. price discrimination. B. simple monopoly behavior. C. cartel pricing. D. price differentiation.
Jon is consuming X and Y so that he is spending his entire income and MUx/Px = 4 and MUy/Py = 4. To maximize utility, he should consume
A. the same amount of X and Y since he is already maximizing utility. B. less X and more Y. C. less of both X and Y. D. more X and less Y.