In the absence of externalities, what can be said about the invisible hand of the marketplace?
a) It induces people to act in a matter inconsistent with self-interest.
b) It leads to a market outcome that maximizes total benefit to society.
c) It increases the transaction costs of contracting between parties in an exchange.
d) It is unable to resolve inherent inefficiencies in market system.
Ans: b) It leads to a market outcome that maximizes total benefit to society.
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Over the past seventy-five years, power within the Federal Reserve has shifted from
A) the Federal Reserve Banks to the Board of Governors in Washington. B) the Board of Governors to the Federal Reserve Bank of New York. C) domestic Federal Reserve banks to foreign Federal Reserve banks. D) the Federal Reserve Bank of New York to the Federal Reserve Bank of Dallas.
Which of the following situations can lead to a winner's curse?
a. A bid which is won by multiple bidders but fails to cover the expectations of the seller. b. A win which makes a player over-enthusiastic about further gambles. c. An overoptimistic bid which helps the bidder to win but fails to cover his costs. d. A win which makes the player risk-averse toward future gambles.