Suppose the price of one euro is fixed at $1.00. A Dutch oil company discovers new oil reserves in the North Sea and offers the oil for sale. What is the result if a flexible exchange rate is allowed?
a. The euro changes in value from $1.00 per euro to an equilibrium price of $1.50 per euro.
b. European goods become more expensive to U.S. residents, moving Q2 to Q1.
c. The euro changes in value from $1.50 per euro to an equilibrium price of $1.00 per euro.
d. U.S. exports become cheaper to Europeans, moving Q2 to Q1.
a. The euro changes in value from $1.00 per euro to an equilibrium price of $1.50 per euro.
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A professional basketball franchise is trying to assemble a parcel of land to build an arena. There are 25 houses on the land the franchise needs. In this case,
A) eminent domain can reduce transactions costs and make a pie-increasing arena possible. B) eminent domain can reduce the likelihood of holdouts and make a pie-increasing arena possible. C) eminent domain is not called for as the land can probably be acquired more efficiently through bargaining. D) Both A and B are correct.
In a market in which the government has set a price ceiling below the equilibrium price:
A. there will be excess supply. B. the quantity demanded will equal quantity supplied. C. a black market might develop. D. quantity supplied will exceed quantity demanded.