Calculate the relative price of a basket of goods sold in the United States and Japan in terms of dollars if the yen/$ exchange rate = 90. The basket costs $100 in the United States and ¥9,000 in Japan. The relative price is:
a. 0.9, which means the U.S. basket costs more.
b. 1.1010, which means the Japanese basket costs more.
c. 0.9, which means the Japanese basket costs more.
d. 1.0, which means they both cost the same.
Ans: d. 1.0, which means they both cost the same.
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In the figure above, with international trade the United States ________ million shirts per year
A) imports 32 B) imports 48 C) exports 16 D) exports 32
Why is there a deadweight loss associated with subsidy payments?
A) There is no deadweight loss from a subsidy. B) Quantity supplied is less than the equilibrium amount, so consumers and producers lose surplus value on those units that are no longer produced. C) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for these additional units is smaller than the marginal cost of producing them. D) The subsidy payment does not distort quantities in the market, but the government cost exceeds consumer willingness to pay for the quantity demanded.