When a firm engages in price discrimination, it sets marginal revenue equal to marginal cost for each separate set of consumers.

Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is

a. elastic. b. inelastic. c. of unitary elasticity. d. perfectly inelastic.

Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?

a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). b. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive). c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative). d. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.