Solutions for Chapter 26: Exotic Options

a situation in which exports equal imports

the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

balances in bank accounts that depositors can access on demand by writing a check

the property of society getting the most it can from its scarce resources

a measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants

the amount of money in the future that an amount of money today will yield, given prevailing interest rates

the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve

the claim that the government should aim to maximize the well-being of the worst-off person in society

an item that buyers give to sellers when they want to purchase goods and services

the costs of changing prices

the quantity of money available in the economy

the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

claims that attempt to prescribe how the world should be

a tax for which highincome and low-income taxpayers pay the same fraction of income

a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

the limited nature of society’s resources

two goods for which an increase in the price of one leads to an increase in the demand for the other

a worker association that bargains with employers over wages, benefits, and working conditions

a measure of happiness or satisfaction