Explain why market power leads to a deadweight loss. Is the total deadweight loss from market power in the United States large or small?
What will be an ideal response?
Market power allows a firm to set its price above marginal cost, which creates deadweight loss. Research suggests that in the United States total deadweight loss from market power is fairly small, perhaps less than one percent of GDP.
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What is the difference between willingness to accept and willingness to pay? For a trade to take place, does the willingness to accept have to be lower, higher, or equal to the willingness to pay?
What will be an ideal response?
In 1964 a certain foreign bank opened a branch in the United States. That branch
A) has always been allowed to underwrite securities. B) has never been allowed to underwrite securities. C) gained the right to underwrite securities by the International Banking Act of 1978. D) lost the right to underwrite securities by the International Banking Act of 1978.