Are there real-world markets that resemble double oral auctions? Suppose you had to organize a double oral auction for a good that has perfectly elastic demand. Do you expect prices to approach the competitive equilibrium?
What will be an ideal response?
Double oral auctions are similar to how trading actually works on stock exchanges—traders announce bids and asks and if they match, a trade is executed.
Double oral auction experiments with many different market variants - including varying the elasticity of supply and demand and the numbers of buyers and sellers - have shown that the equilibrium price in the market will be very close to where the supply and demand curves intersect. So, the price in a double oral auction for a good with perfectly elastic demand is also expected to approach the equilibrium price.
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Everything else held constant, in the market for reserves, when the supply for federal funds intersects the reserve demand curve along the horizontal section of the demand curve, lowering the interest rate paid on excess reserves
A) increases the federal funds rate. B) lowers the federal funds rate. C) has no effect on the federal funds rate. D) has an indeterminate effect of the federal funds rate.
Most economists believe that:
A. all spillover costs should be eliminated. B. spillover costs should be considered in determining optimal output. C. the control of spillovers is costless. D. spillover costs do not cause a misallocation of resources.