If the interest rate of a foreign country is less than that of the domestic country, then the foreign country should have a positive forward premium on its currency.

Imagine that the state legislature raises the tax on gasoline by 10 cents/gallon. What most likely happens next?

a. Service station operators pass along the tax to you, adding the 10 cents to the price of a gallon of gas. b. Service station operators grumble, but pay the tax without passing the cost along to you. c. Service station operators pass along as much of the tax to you as they can, probably about 6 cents/gallon. d. None of these choices.

Monopolistic competition is similar to perfect competition in that:

A. firms advertise in both cases. B. both entail the production of differentiated products. C. output is at minimum average total cost in both. D. long-run profits tend toward zero in both.