Suppose the required reserve ratio is 10 percent, but banks choose to hold an additional 15 percent of demand deposits as excess reserves. Under these conditions, the demand deposit multiplier will be
a. 0
b. 4
c. 5
d. 6.67
e. 10
B
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Cartel agreements are difficult to sustain because:
A. it's usually easy to discover if one of the members has cheated. B. cartel members do not face the economic incentives inherent in a prisoner's dilemma. C. the collective payoff to all the cartel members is lower when they all abide by the cartel agreement. D. it's a dominant strategy for each cartel member to cheat on the cartel agreement.
If the world price for good A is above the domestic price for good A without trade, then consumer surplus will ________ and total economic surplus will ________ with trade.
A. increase; decrease B. decrease; increase C. decrease; decrease D. increase; increase
The marginal rate of substitution is
A) equal to unit changes in the quantities of both goods so that utility rises. B) the slope of the budget line at all points. C) the change in the quantity of one good that just offsets a unit change in another good, keeping utility constant. D) found by adding additional units.
Suppose an unregulated monopoly faces a negatively-sloped and steep average cost curve. If a second firm enters, what will happen to the first firm's demand and average cost of production?
What will be an ideal response?