In a competitive market with large search costs, many firms, and asymmetric information, why is the monopoly price the only possible single-price equilibrium?
What will be an ideal response?
If firms all sell for some price below the monopoly price, then any one firm can benefit by raising price by less than the cost of searching. All firms have this incentive, which disappears when the monopoly price is set. At the monopoly price, any change in price will lower profit.
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If the currency to deposit ratio decreases and the monetary base is unchanged, the value of the money multiplier will ________ and the value of the money supply will ________
A) decline; decline B) decline; increase C) increase; decline D) increase; increase
When a bank's excess reserves are zero:
a. its required reserves exceed its legal reserves. b. its liabilities exceed its assets. c. its liabilities must be lower than its assets. d. its required reserves equal its legal reserves. e. it cannot meet its reserve requirement.
If autonomous consumption decreases, which of the following would occur in the short run?
a. a decrease in GDP, a decrease in the price level, a decrease in money demand and a decrease in the interest rate. b. an increase in GDP, an increase in the price level, an increase in money demand and an increase in the interest rate. c. a decrease in GDP, an increase in the price level, an increase in money demand and an increase in the interest rate. d. an increase in GDP, a decrease in the price level, a decrease in money demand and an increase in the interest rate. e. a decrease in GDP, a decrease in the price level, an increase in money demand and an increase in the interest rate.
From the standpoint of economic efficiency, markets tend to provide
a. less of a public good than would be efficient. b. more of a public good than would be efficient. c. exactly the amount of a public good that is efficient. d. none of the above.