Exam 7: The Price System

Newly formed trade unions raise wages for workers in Country X, where cars are manufactured. The higher wages increase the costs for the car manufacturers, who then relocate to Country Y, where labor costs are lower. Car manufacturing begins to thrive in Country Y relative to Country X. Which answer BEST describes the concept highlighted by this scenario?

Speculation is:

Which scenario would cause a speculator in chicken and beef futures to use a "buy low and sell high" strategy for chicken?

Which statements are TRUE? I. A high price for a good encourages consumers to economize on its use, seeking out alternatives. II. Rising prices give firms the incentive to bring more goods to the market. III. Firms that experience rising input prices will seek out substitute inputs and develop production technologies to conserve on the costly input.

A prediction market predicts future prices of goods and services.

Use the following to answer questions: Figure: Demand Curve Sections -(Figure: Demand Curve Sections) Refer to the figure. The section of the demand curve labeled A represents:

Brazil is the largest producer and consumer of ________ in the world.

Sales teams have little incentive to report low sales projections to their CEOs-prediction markets help to overcome this problem.

A rising price for gasoline may mean that new-home builders switch from using asphalt for driveways to using brick for driveways.

The market solves the information problem when allocating resources by:

The bankruptcy of firms:

The central planning approach proved ________ because ________.

Economist Friedrich Hayek pondered over what economic puzzle?

During the 1973-1974 oil crisis, the United States government implemented price controls and other regulations in order to try and keep prices low. Were these policies the best way to lower prices for consumers? What would have happened in the absence of these price controls?

Which statement is an example of speculation?

Speculators drive prices up in the current period by withholding supply, but they decrease prices in the future by increasing supply.

On June 30, 2011, the price of 5,000 ounces of silver for December 1, 2013, was about $36 an ounce (or $180,000 for all 5,000 ounces). Suppose Chloe believes that the price of an ounce of silver in December 2013 will be $20. Should Chloe agree to buy or sell silver in a futures contract?

The United States is the world's largest consumer of ethanol.

Jeff agrees to buy 40,000 pounds of frozen pork bellies for delivery one year from now; upon delivery he will pay $32,400. This transaction is called a:

What is the great economic problem?