Which of the following is an example of direct foreign investment?
A. A foreign citizen travels to the United States as a tourist, spending money in the United States on various goods and services.
B. The German-owned BMW company builds an assembly plant near Greenville, SC.
C. A foreign citizen buys a share of stock in Ford.
D. A foreign citizen lends money to General Motors by buying a GM bond.
Answer: B
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In the above figure, if a subsidy is granted to producers that generates an efficient level of production, then the deadweight loss will be
A) zero. B) $500 C) $1,000. D) $2,000.
Ricky and Anita are 10 year-olds who have a lemonade stand on a busy beach and would like to practice price discrimination. They know that they are the only sellers of lemonade on the beach and that adults have a less elastic demand for lemonade than kids so they decide to sell their lemonade for $0.25 to kids and $0.50 to adults. Will their price discrimination be successful? Why or why not?
A. Yes, they have all of the necessary criteria to successfully price discriminate. B. Yes, the only necessary conditions is that they know the relative elasticities of the market segments. C. No, the kids who buy their lemonade can practice arbitrage. D. No, Ricky and Anita are price takers.