Explain how more than one possible state of nature affects contract choices
What will be an ideal response?
The uncertainty of the state of nature introduces the risk of random events. This forces principals and agents to incorporate efficiency of risk bearing into contracts.
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How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?
What will be an ideal response?
After the Arab oil embargoes, there was concern about the impact of higher gas prices on the low-income worker. The government imposed price controls on oil to protect the poor from this situation. Explain the inefficiency of this price ceiling and how taxes, rather than prices, could be used to solve the problem.
What will be an ideal response?
Over the Fed's history, it has targeted
a. bank reserves. b. the Federal funds rate. c. monetary aggregates. d. inflation. e. all but d.
Refer to the information provided in Figure 8.8 below to answer the question(s) that follow. 
Figure 8.8 Refer to Figure 8.8. This farmer's profit-maximizing level of output is ________ units of output.
A. 200 B. 700 C. 1,000 D. 1,400