ch 2 micro
suppose the current exchange rate between the U.S dollar and the Mexican peso is $0.10= 1 peso. Furthermore, suppose the price level in the United States rises 15 present at a time when the Mexican price level is stable. According to the purchasing power parity theory, what will be the new equilibrium exchange rate?
$0.115= 1 peso
if jack bought 12 DVDs last year when his income was $40,000 and he buys 14 DVDs this year when his income is $43,000 then his income elasticity of demand is ___ which means that DVDs are a(n) _____ good for jack
+2.13; normal
19-7. Which of the graphs shows a perfectly inelastic demand curve
1
19-9. What is the price elastic of demand between $4 and $6?
1.25
34-9 for country y, the opportunity cost of producing one unit o good A is _____ unit(s) of good B
1/2
refer to exhibit 20-4. the opportunity cost of one unit of good A is ___ for country 1 and ___ for country 2.
1/2B; 1B
34-9. for country x, the opportunity cost of producing one unit of good A is ______ unit(s) of good B.
1/3
refer to exhibit 34-1. The opportunity cost of one unit of X in France is
1/3Y
an American computer is priced at $1,200. if the exchange rate between the U.S. dollar and the Mexico peso is $0.09= 1 peso, approximately how many pesos would a Mexican buyer pay the computer?
13,333 pesos
refer to exhibit 20-1. the opportunity cost of one unit of Y in France is
1x
34-10 jason's opportunity cost of cleaning the house is
2.00 moved lawns
19-5. For graph (1) what is the price elasticity of demand going between $2.00 and $1.50
2.33
Refer to Exhibit 34-1. The opportunity cost of one unit of x in the United States is
3/2y
20-9. In the no specialization-no-trade case, country X produces and consumers 100 units of good A and 10 units of good B. country y producers and consumes 10 units of good A and 20 units of good B. if the two countries specialize and trade, and the actual amounts traded are 20 units of good A for 16 unites of good B, how many more units of good A will country X consume by specializing and trading
30
19-2. the market for good X is initially in equilibrium at $5. the government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do producers end up paying?
45 PERCENT
Suppose a Mexican consumer wants to buy an American television for $500 and an American wants to buy a Mexican raincoat for 700 pesos. If the exchange rate is $0.10 = 1 peso, then the price of the television in pesos will be __________ and the price of the raincoat in dollars will be __________.
5000 pesos; $70
34-9. Which of the following statements is true?
A, B, and C country x has a comparative advantage in the production of good A country Y has a comparative advantage in the production go good B it would be better for country X to specialize in (the production) and trade good A than to specialize in and trade good B
the effects of a quota include
A,b, and c decreasing consumers' surplus increasing total revenue for the importers who sell the allowed number of imported units increase producers' surplus
the answer is: "A reduction in consumers' surplus." what is the question?
A,b, and c what is an effect of a rise in price? what is an effect of a tariff? what is an effect of a quota?
Which of the following founders of the United States used the infant- industry argument to support trade restrictions?
Alexander Hamilton
The answer is: "A tax on imports." What is the question?
C and D what is a tariff what reduces consumers' surplus?
consumers receive more consumers' surplus when ____
Tariffs do not exist
under a fixed exchanged rate system, if the dollar price of Mexican pesos is above its equilibrium level, the peso is referred to as overvalued and the dollar is necessarily undervalued
True
which of the following is an example of a trade restriction?
a and b quotas tariffs
The national defense argument for trade restriction holds that
a country should produce those goods necessary for national defense purposes even if it doesn't have a comparative advantage in them
the national defense argument for trade restriction holds that
a country should produce those goods necessary for national defense purposes even if it doesn't have a comparative advantage in them
a quota is a
a legal limit on the quantity of a good that may be imported
some economists have found that U.S imports of Chinese goods and resources
all of the above
if the income of U.S citizen falls relative to the income of Japanese citizens, the dollar will _____ in terms of the yen, and the yen will ____in terms of the dollar.
appreciate; depreciate
35-5 based on the information provided in this table, between Monday and Tuesday, the U.S dollar _______ against the Thai baht and the baht _____ against the U.S dollar.
appreciated; depreciated
Evidence indicates that tariffs and quotas are
b and C beneficial for producers in a protected industry, but not beneficial for consumers beneficial for workers in a protected industry, but not beneficial for consumers
suppose that prices in the United States rise relative to prices in France. We expect that (on the foreign exchange market) the demand of U.S dollars will _____and the supply of dollars will_____
decrease; increase
If real interest rates in Japan fall relative to real interest rates in the United States, the yen will likely _____ in terms of the dollar and the dollar will likely ___ in terms of the yen.
depreciate; appreciate
if as a result of market forces, the exchange rate changes from $1 equals 11 pesos to $1 equals 9 pesos, then the dollar has
depreciated
suppose that the exchange rate between the U.S, dollar and the Mexican peso is 1 peso = $0.11. if the US dollar price per Mexican peso changes to 1 peso= 0.10 the peso is said to have _____ and the dollar to have _____
depreciated; appreciated
those economist who argue that the European Union is not a true optimal currency erea cite _______and___ as justification for this position
differences in language; culture
If, under a fixed exchange rate system, the dollar price of Mexican pesos is below its equilibrium level, then the
dollar is overvalued
If the seller of good X raises the price of good X, it follows that the total revenue of good X will __________, if demand is __________.
fall; elastic
a quota raises the price of the product on which the quota has been placed, decreases consumers' surplus, increases producers' surplus, and generates tariff revenue for the government
false
all economists agree that the European Union is an example of a true a optimal currency area
false
as a result of a quota, both consumers' surplus and producers' surplus fall
false
consumers receive more consumers' surplus when tariffs exist than when they do not exist
false
if $1=96 Japanse yen on Wednesday and on Thursday $1=100 Japanese yen then the dollar depreciated against the yen between Wednesday and Thursday
false
if a good is a normal good, it can not also be income inelastic
false
if a good is perfectly inelastic in a given price range, it will be perfectly inelastic at all prices
false
income elastcity of demand measures the responsiveness of quantity supplied to changes in price
false
it is impossible for a given good to be both elastic in demand and inelastic in supply
false
it is necessary for government officials to analyze cost data to determine what their country should specialize in producing
false
the term off sourcing is used to describe work done for a company by individuals working for another company in a different country
false
in contrast to a tariff, a quota does not
generate revenues for government
When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency, the foreign currency
has depreciated
if the equilibrium exchange rate between U.S dollars and Japanese yen is $0.01=1 yen, but currently the exchange rate is $0.009=1 yen, them with flexible exchange rates the dollar price of a yen will _____and the yen will _____.
increase; appreciate
a broadway play company can only charge one price for tickets to a given performance of its play. the company manager notices that the company earns greater total revenue when they charge a higher ticket price and its theater is three-quarter full
inelastic
if the percentage change in quantity demanded is less than the percentage change in price for good Y, then the demand for good Y is
inelastic
company Z is a us company that is the first in this country to produce a good that is already produced in many foreign countries and sold in the United States. Most likely, the argument it will voice in its attempt to be protected from foreign competition is the _____argument
infant-industry
if the average income per U.s worker decrease while that of Japanese workers remains unchanged, then the demand curve for Japanese yen will shift ______, which will cause the equilibrium exchange rate of the dollar price per yen to ______, which is the same thing as saying that the dollar will _____.
leftward fall; appreciate
As the dollar price of a foreign currency (for example, dollars per yen) decreases, foreign goods will be ____expansive, ________ foreign goods will be purchased, and _____ foreign currency will be demanded
less; more; more
the purchasing power parity theory predicts better in the there _______in inflation rates across countries
long; are large differences
with a quota, the _____ is greater than the ____.
loss in consumers' surplus; loss in producers' surplus plus higher total revenues on the imported goods
government wants to maximize its tax revenue and it can only place a $2per-unit tax on one of two goods. It should place the tax (on the production) of good whose demand curve has the
lower price elasticity of demand
the current international monetary system is best described as a
managed flexible exchange rate system
all other things being equal, the ____substitutes for a good, the _____ the good's price elasticity of demand tends to be
more; higher
the answer: "There is a net loss to society." What is the question?
none of the above
19-5 for graph (3) if the seller of good X raises the price from $1.50 to $2.00, the total revenue the seller receives will
not change
35-4 under a fixed exchange rate system, at the exchange rate of E3, the dollar is _______ and there is a ______
overvalued; surplus of dollars
countries tend to specialize in the production of goods in which they have a comparative advantage because
people want to make a profit
in a foreign exchange market diagram with dollars per peso on the vertical axis, the quantity of ______would be on the horizontal axis, and the us demand for Mexican goods would help to determine the ___ curve
pesos; demand
international trade policies are largely advocated, argued, and lobbied for based more on their distributional effects than on their aggregate or overall effects. what does this imply?
producers will lobby for protectionism even though they may know that their gains from protectionism will be outweighed by the losses to consumers
A quota on imported avocados _____ the price of avocadoes, _______consumers' surplus for avocado buyers, _______Because the loss to _____is more than the gain to ____ there is a net loss to society
raises; decreases; increases; does not generate; consumers; producers and government
If the U.S. dollar appreciates in the foreign exchange market, U.S. exports will be _____ and U.S imports will be
relatively more expansive; relatively less expensive
If the U.S. dollar appreciates in the foreign exchange market, U.S. exports will be ______ and U.S imports will be _______.
relatively more expensive; relatively less expansive
if the equilibrium exchange rate between the US dollars and the Japanese yen is $0.01=1 yen but currency the exchange rate is $0.0089=1 yen, then a ____ exists
surplus of dollars shortage of yen b and D
Which of the following is not an argument for trade restrictions?
the comparative advantage argument
producers' surplus is
the difference between the price a seller receives for a good and the minimum price for which he would have sold the good
There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. If the inflation rate in the United States rises relative to the inflation rate in Mexico, it follows that
the dollar will depreciate and the peso will appreciate
To know whether the dollar is overvalued, we need to know
the equilibrium exchange rate between the dollar and the foreign currency the dollar is being compared to
There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. The real interest rate in the united states rises relative to the real interest rate in Mexico. it follows that
the peso will depreciate and the dollar will appreciate
Dumping refers to
the sale of good abroad at a price below their cost and below the price charged in the domestic market
How do countries know when they have a comparative advantage in the production of a good?
they know as the result of individuals trying to earn profits and buying low and selling high in the process.
If Americans demand goods produced in Mexico, it leads to a demand for Mexican pesos and a supply of U.S. dollars on the foreign exchange market.
true
a good is unit elastic in demand if as the price changes there is no resulting change in total revenue
true
a tariff raises the price of the product on which the tariff has been placed, decreases consumers' surplus, increases producers' surplus, and generates tariff revenue for the government
true
advocates of a fixed exchange rate system argue that fixed exchange rates promote international trade
true
countries that engage in specialization and trade can consume at a level beyond their production possibilities frontier.
true
ford mustangs would tend to be more elastic in demand than all cars because they are more substitutes for ford mustangs than for cars
true
in the foreign exchange market between dollars and pesos, the demand for dollars by Mexicans creates the supply of pesos
true
it is very important for the seller of a good to know wether the good is elastic, unit elastic, or inelastic demand so that she will know what will happen to total revenue when she changes the price of the good.
true
one example of an optimal currency area is the states within the United States
true
one of the arguments in favor of trade restrictions is the foreign- export-subsidies argument
true
the U.S dollar currently serves as the "unit of account" of major global products.
true
the concept of an optimal currency area arose from the debate over whether fixed or flexible exchange rates are better
true
the law of comparative advantage can be used to explain why many couples divide up their household duties along gender lines
true
the more narrowly defined a good is, the more elastic the demand for the good will tend to be, ceteris paribus
true
when a good is perfectly inelastic in demand, or perfectly elastic in supply, the buyers will pay the full tax that is placed on the sellers
true
when the price of good rises, total revenue will fall if the good is last in demand
true
35-4. under a fixed exchange rate system, at the exchange rate of E3, the peso is ______ and there is a _____
undervalued; shortage of pesos
refer to exhibit 35-4. under a fixed exchange rate system, at the exchange rate of E3 the peso is______ and there is a ____
undervalued; shortage of pesos
if labor is immobile between two countries, changes in relative demand for goods and services may pose major economic problems
when exchange rates are fixed but not when they are flexible
which of the following statements is false
when the value of a country's imports greater then the value its exports, the country's net exports will a positive value
economist Charles kindleberger (a proponent of fixed exchange rates mentioned in the text) would agree with which of the following statements?
with no certainty of what one nation's currency will be worth in tens of other nations' currencies, international trade is held below what it could be.
