The term market mechanism refers to
A. Resource allocation based on consumer needs.
B. Resource allocation based on a production possibilities curve.
C. Government laws and regulations concerning how the market should operate.
D. The use of market prices and sales to signal desired output.
Answer: D
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Because of the monopoly power that comes with being the only firm to produce a product, it is always more efficient to have multiple firms in an industry.
Answer the following statement true (T) or false (F)
Refer to the scenario above. If the government enforces a ban on Firm B, and asks Firm A to carry out all the production:
A) Firm A's marginal cost is likely to decrease, but its average cost is likely to increase. B) Firm A's marginal cost and average cost are likely to decrease. C) Firm A's marginal cost is likely to increase, but its average cost is likely to decrease. D) Firm A's marginal cost and average cost are likely to increase.
According to the Black-Scholes formula:
a. the value of an in-the-money option will equal the difference between the stock's current price and the strike price. b. the payoff from an average option is either a multiple or a power of the difference between the strike price and the price they are exercised at. c. the holder of a basket option has the right to buy or sell the underlying at the highest price it has attained over the life of the option. d. the price of a call or put option varies with the price of the underlying asset.
Monetarists have trouble accepting the Keynesian view on money and the effect of money on the economy. Monetarists, unlike Keynesians, believe that
a. there is a strong cause-and-effect relationship between the money supply and real GDP, increase one and the other increases as well b. there is a strong cause-and-effect relationship between changing expectations and the velocity of money c. the economy is typically at full employment so that any increase in the money supply will only result in inflation d. the cause-and-effect relationship between the money supply and money demand is mutually interdependent, that is, any increase in supply increases demand and anyincrease in demand increases supply so that the economy is typically in equilibrium e. there is a strong cause-and-effect relationship between the interest rate and the price level that works as follows: increase the interest rate and real GDP increases whichdecreases the price level