The primary purpose of bank regulation is to
A. assure that banks do not get into financial trouble.
B. assure that banks lend to needy persons and businesses.
C. assure that banks maintain a minimum level of profits.
D. guarantee bank profitability and prevent stockholder losses.
Answer: A
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When economies of scale limit the number of firms in an industry to 3, there is a
A) natural monopoly. B) natural oligopoly. C) legal oligopoly. D) legal cartel. E) natural monopolistic competition.
Consider two firms that are in the same industry and the industry is competitive. Initially each firm employees equal amounts of type A and type B labor
Labor is perfectly mobile between the two firms, and type A and type B labor are perfect substitutes. Diagram separately the equilibrium conditions in the labor markets for type A and type B labor. What must be true about the wages both firms face? Why? Now assume that one of the firms decides not to hire type A labor due to some type of discrimination. What do you think will happen to the type A labor supply for both firms? How do you think the action will affect the wages for type A labor relative to type B? Why?