Total profit equals

The rational expectations hypothesis assumes that individuals will

a. never make forecasting errors. b. be as likely to overestimate as to underestimate the future rate of inflation. c. continually make systematic forecasting errors. d. ignore past forecasting errors when formulating predictions.

Which of the following reasons for international specialization best explains why many small-population countries import automobiles from Japan, the U.S., and Germany rather than produce them domestically?

a. Differences in resource endowments b. Economies of scale c. Differences in tastes d. Trade restrictions