Explain how prices in a competitive market form --- and how they take the place of almost limitless information that a social planner would need if he tried to mimic the market outcome.
What will be an ideal response?
See section 15A.3.3 in the text.
You might also like to view...
Open market sale will result in:
A) increase in bank reserves and a decrease in the federal funds rate. B) increase in bank reserves and an increase in the federal funds rate. C) decrease in bank reserves and a decrease in the federal funds rate. D) decrease in bank reserves and an increase in the federal funds rate.
Which best describes a credit default swap?
A) It is designed to reduce interest-rate risk. B) The issuer receives payments from the buyer in return for agreeing to make payments to the buyer if the security goes into default. C) Issuers are taking out insurance in case of default. D) It represents a way for the issuer to establish its creditworthiness.
Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per day. If the market wage is now $62.50 per day, what was the first employee earning when she worked alone?
a. $40. b. $45. c. $50. d. $55. e. $60.
According to the equation of exchange, if Real GDP is $3 trillion and the money supply is $0.5 trillion, then velocity
A) must be 6. B) must be 1/6. C) must be 4 trillion. D) must be 1/4 trillion. E) cannot be determined without knowing what the price level is.