The purchasing power parity theory predicts that the exchange rate between two currencies will adjust in the long run to reflect price-level differences between the two currency regions. A given basket of internationally traded goods should therefore sell for similar amounts around the world (net of transportation costs)

On average, if demand is unknown and costs of underpricing are _______ than the costs of overpricing, then _________

a. Smaller; overprice b. Smaller; underprice c. Larger; underprice d. None of the above

Mike is able to complete a tax return in two hours earning a fee of $100 . As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour. His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour. Both individuals could benefit if

a. Mike worked on tax returns for eight hours and paid Joe $5 for each car he washed b. Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed. c. Mike worked on tax returns for eight hours and paid Joe $15 for each car he washed d. Joe worked on tax returns for eight hours and paid Mike $10 for each car he washed