The purchasing power parity predicts that if US price level falls relative to the Mexico price level, then
a. Dollar value will rise relative to the peso
b. Dollar value will fall relative to the peso
c. There is no effect on either currency
d. PPP predicts price level will normalize in the long-run
QUESTION 2The existence of diseconomies of scale (size) for the firm is hypothesized to result from:
a. transportation costs
b. imperfections in the labor market
c. imperfections in the capital markets
d. problems of coordination and control encountered by management
e. All of the above
QUESTION 3Harry's HVAC sells its new units with locked and encrypted servicing software, which only Harry's own service technicians can operate. Why would it want to do that?
a. To ensure that the customer knows that they are stuck with Harry's service technicians
b. To ensure that Harry's technicians do not service the equipment.
c. To ensure that the customers do not buy second-class servicing and then infer faulty design if a unit breaks down due to inadequate service
d. All of the above
QUESTION 4Holding other things constant, decreases in the price level in the US will
a. Cause the dollar to gain value
b. Cause the dollar to lose value
c. Does not affect the dollar value
d. None of the above
QUESTION 5Possible sources of economies of scale (size) within a production plant include:
a. specialization in the use of capital and labor
b. imperfections in the labor market
c. transportation costs
d. a and b
e. a and c
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