A country with an undervalued currency
A. will have a balance of payments deficit.
B. will accumulate reserves of foreign currencies.
C. will suffer losses of foreign reserves.
D. must intervene in the foreign-exchange market to buy its own currency.
Answer: B
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When policymakers impose price controls, they
a. are usually following the advice of mainstream economists. b. usually improve the efficiency of economic activity. c. distort the signals that normally guide the allocation of resources. d. demonstrate a willingness to sacrifice equity in order to improve efficiency.
On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. Suppose that the Minnesota State Park Service institutes a variable fee structure. On weekdays when the picnic areas get little use, the fee is zero. On normal weekends, the fee is $8 per person. On holiday weekends, the fee is $14 per
person. The fee system corrects a problem known as the a. Coase theorem. b. free rider problem. c. Tragedy of the Commons. d. public goods problem.