Writing in the New York Times on the technology boom of the late 1990s, Michael Lewis argues, "The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge." What does Lewis
means by the benefits of new technology being "passed right through to consumers free of charge"?
A) Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being "passed right through to consumers free of charge."
B) In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology "free of charge."
C) In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology "free of charge."
D) In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology "free of charge."
Answer: C
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When the consumer price index rises, the typical family
a. has to spend more dollars to maintain the same standard of living. b. can spend fewer dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can offset the effects of rising prices by saving more.
Consider someone who borrows $10,000 to buy a car at a fixed interest rate of 9%. If inflation is 3% at the time the loan is made, what is the real interest rate at which the loan must be repaid, and to what level would the interest rate have to rise for the real interest rate on the loan to be zero?
a. 4.5%; 7.5% b. 6; 9% c. 8%; 10% d. 6; 12%