Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 5, Problem 3RQ
To determine
Example of rent seeking.
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Ahmed is an agent for Bader for maintaining Bader’s antique cars collection, including sale and purchase of antique cars. Ahmed has had this position for several years, but recently Ahmedhas developed a cocaine habit. He recently sold one of Bader’s cars and kept some of the money himself to buy some cocaine. Soon thereafter, Ahmed was declared bankrupt. The government then notified Ahmed that he had sold the maximum allowable number of cars in a year without getting a dealer’s license. Shortly thereafter, Bader was on a secluded island and died, which no one knew about until 2 weeks later. Discuss the effect of these events on the existence of the agency.
Elvira College has an enrollment of 1,000 students and is located in a small Midwestern town named Johnsonville. Johnsonville has a total population of 2,500 people. The nearest town is 20 miles away. Most of the residents shop locally, but they travel about once a month to the larger city and pick up the large-ticket items. Johnsonville has one fairly good-size supply store named Jameson's Grocery. The only other place in town where you might buy supplies is at the gas station/convenience store located on the edge of town. What competitive situation is Jameson's Grocery experiencing?Competitive Situation:Explanation:
You are in the market for a used 2006 Honda Accord. You know that half of the 2006 Accords are lemons and half are peaches. If you could be
assured that the Accord you were buying were a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing
to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other
hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and
peach sellers will be willing to sell their cars for $8,500 or more.
Over time the price in the market for 2006 Accords will
and
will be traded.
O A. be between $8,500 and $10,000; only peaches
O B. be between $1,500 and $2,000 for lemons; only lemons
OC. be between $8,500 and $10,000 for peaches and between $1,500 and $2,000 for lemons; both lemons and peaches
O D. be between $1,500 and $10,000; both lemons and peaches
Chapter 5 Solutions
Macroeconomics: Principles, Problems, & Policies
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