If you know that you can afford a $500 per month car payment for the next 48 months, the interest rate is positive, and you have found a car dealer who will agree to a zero down payment, you will
A. be able to afford something less than a $24,000 car.
B. be able to afford a $24,000 car (which is exactly $500 × 48).
C. be able to finance a more expensive car when the interest rate is high.
D. be able to afford a $25,000 car (which is more than $500 × 48).
Answer: A
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When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of
A) a market mechanism. B) macroeconomics. C) opportunity cost. D) a fallacy of composition.
Rational expectations involve the assumption that
A) market participants make use only of information on the past performance of an asset in determining what they believe its price should be. B) market participants rarely change their minds about the correct price of an asset. C) financial markets are good at increasing liquidity, but poor at transmitting information. D) market participants makes use of all available information.