Spacely Sprockets, Inc, usually pays 1,000 for a million flanges, which it uses as inputs in the ...

Spacely Sprockets, Inc, usually pays 1,000 for a million flanges, which it uses as inputs in the manufacture of sprockets. It also spends an average of 20 per million flanges on finding manufacturers and negotiating contracts. Spacely is capable of making its own flanges at a cost of 980 per million. Given these costs,
 a. Spacely should continue to contract out for flanges
  b. Spacely should start to manufacture its own flanges
  c. it's not possible to say what Spacely should do
  d. Spacely should stop paying the additional 20 to find and negotiate contracts and just buy the flanges outright for 1,000 per million
  e. Spacely should move away from the use of flanges and toward an input that it can produce by itself

QUESTION 2

If the purchasing power parity theory were literally true
 a. we should see some nations devaluing their currencies relative to the U.S. dollar while other nations revalue their currencies
  b. the price of a traded good should be the same everywhere in the world
  c. the price of a Big Mac should be the same everywhere in the world
  d. the exchange rate should be the same everywhere in the world
  e. prices should tend toward equality with exchange rates

QUESTION 3

Which of the following is true of vertical integration?
 a. It leads to the formation of larger firms from smaller ones.
  b. It occurs when a firm adds more layers of management.
  c. It occurs when firms try to buy up their competitors and corner the market.
  d. It has no effect on the internal organization of a firm; it only affects outside markets.
  e. It occurs when a firm buys another firm in a completely unrelated market.

QUESTION 4

The purchasing power parity theory is a good predictor of
 a. all of the following
  b. the long-run tendencies between changes in the price level and the exchange rate of two countries
  c. interest rate differentials between two countries when there are strong barriers preventing trade between the two countries
  d. how intervention in exchange markets by central banks influences prices in various countries
  e. the day-to-day relationship between changes in the price level and the exchange rate of two countries

QUESTION 5

By integrating vertically,
 a. firms trade with one another through markets
  b. firms trade with one another through government intermediation
  c. firm and market processes are connected to produce a good or service most efficiently
  d. the various procedures involved in producing a good are collected within one firm
  e. the various procedures involved in producing a good are parceled out among various contractors