A Middle Eastern country has an oil reserve that it can extract for a profit of $60 a barrel today, $65 a barrel in two years, $70 a barrel in three years, and $75 in four years. The current market rate of interest is 7 percent. When should this country tap into its oil reserve to obtain the most profit per barrel in present value terms?

Both a perfectly competitive firm and a monopolist:

a. always earn an economic profit. b. maximize profit by setting marginal cost equal to marginal revenue. c. maximize profit by setting marginal cost equal to average total cost. d. are price takers.

What is the result when the Fed raises the discount rate?

a. The country’s economic growth is stimulated. b. The money supply contracts. c. Banks borrow more money from the Fed. d. The rate of inflation increases.