The light bulbs currently made by a manufacturer currently last 1 year. People place a value of $2.42 on one year's worth of light from a light bulb, and the market rate of interest is 10%. The manufacturer is considering a quality improvement that would make its light bulbs last 3 years. Should the manufacturer make the quality improvement?
a. No, because it will substantially reduce the number of light bulbs sold.
b. Yes, as long as it costs less than $2.42 per light bulb.
c. Yes, as long as it costs less than $4.20 per light bulb.
d. Yes, as long as it costs less than $4.84 per light bulb.
c. Yes, as long as it costs less than $4.20 per light bulb.
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The law of demand in the foreign exchange market refers to the relationship between the
A) exchange rate and the quantity of U.S. dollars demanded. B) interest rate and the exchange rate. C) interest rate and the quantity of U.S. dollars demanded. D) U.S. price level and the exchange rate.
Perfect (first degree) price discrimination:
a. is a common occurrence in situations with many buyers. b. occurs fairly often in situations with only a few buyers. c. is only observed in competitive markets. d. rarely occurs because firms do not have sufficient information to differentiate among specific buyers.