More borrowing by firms in the domestic currency is one way to reduce currency mismatch. What would be the major issue if government insured repayment of the loans at a low cost?
A) There would be lots of new borrowing, and the production sector might not be able to keep pace.
B) It would be too expensive.
C) There could be a moral hazard problem with excessive risk taking.
D) It is likely that no new borrowing would take place—firms need the incentive of tax breaks.
Answer: C) There could be a moral hazard problem with excessive risk taking.
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The demand for salt is probably more inelastic at generally prevailing prices than the demand for potatoes because
A) potatoes require salt but salt does not require potatoes. B) salt has long been a favorite target for taxation. C) salt is cheap relative to most users' incomes and has few good substitutes. D) salt will keep longer than potatoes before spoiling. E) there is so much potential salt in the ocean.
For a purely competitive seller, price equals:
A. average revenue. B. marginal revenue. C. total revenue divided by output. D. all of these.