When is an outcome (allocation) Pareto efficient?

Suppose instead of defaultin… Show more A bank has $500 of capital, $750 of deposits and “rr†is 20%. Suppose instead of defaulting, all of the loans are paid back (without interest, for simplicity). How does this change the money supply? 2. How much of the currency is held by households? How much of the currency is held by banks? • Show less

Marginal revenue is equal to product price if this firm is in a perfectly competitive market. Assume… More »

tomatoes: P… Show more Consider two countries: USA and Canada. Both countries have the same market demand for tomatoes: P = 200 – 2Q. In each country there is a single monopolistic firm that produces tomatoes and the firm’s marginal cost is MC = 20. If a firm ships the tomatoes across the border the transportation cost is T = 10. i.) Find the equilibrium price and quantity traded in autarky in USA ii.) Suppose each monopolist is allowed to sell both domestically and export the good. At what price will the good be traded? What quantity will each firm sell domestically and what quantity will it export? iii.) What is the gain in consumer surplus (comparing to autarky) if trade is allowed? What are firms’ profits in autarky and in free trade • Show less