Under a fixed exchange-rate system, in order to maintain the exchange rate:
a. governments must adopt a laissez-faire economic policy.
b. all trading partners must enjoy the same level of economic growth.
c. currencies must be inconvertible.
d. the imports of one country must equal the exports of its trading partner.
e. governments must intervene in the foreign exchange market.
QUESTION 2High barriers to entry protect the market power of existing firms and discourage the formation of firms which:
a. invest heavily in research and development activities.
b. use illegal procedures to capture the market.
c. are inefficiently small and cannot realize economies of scale.
d. are large enough to dominate the existing firms.
QUESTION 3A monopolist's supply curve cannot be derived directly from its marginal cost curve as in the case of a competitive firm.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Which of the following is a correct listing of industry models ordered from most competitive to least competitive?
a. perfect competition - monopolistic competition - monopoly
b. perfect competition - monopoly - monopolistic competition
c. monopolistic competition - perfect competition - monopoly
d. monopolistic competition - monopoly - perfect competition
QUESTION 5Fixed exchange rates require the economic policies of countries linked by the exchange rate to be:
a. completely independent.
b. complementary to each other.
c. determined by the World Bank.
d. similar in nature.
e. determined by the International Monetary Fund.
QUESTION 6An agreement between the dominant firm and the fringe members to keep output low often breaks because:
a. the fringe firms usually appropriate a larger share of the profits.
b. the agreement is not self enforcing.
c. the dominant firm usually appropriates a larger share of the profits.
d. both have an incentive to charge a higher price for their output.
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