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5

Complete market is a market where every possible asset or good can be assigned a price and where you have perfect information, can make perfect contracts and zero transaction costs. Any market can be complete regardless of its market structure. So you can have complete market dominated by monopoly, or oligopoly or monopolistic competition etc. Perfectly ...


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Equilibria: in the macroeconomic sense of aggregate equilibrium where all markets clear, markets are most likely never in any equilibrium but rather in constant flux between different equilibria, because the market clearing macroeconomic equilibrium always depends on real and also in short run nominal factors which constantly change. Hence it does not make ...


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The Brent price is for oil physically delivered in the UK. The price that went negative if for oil delivered in West Texas, US. The physical and economic conditions at the two places are different - volume available, flexibility of that volume, demand, storage, and so on. This leads to different prices.


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A homebody is someone who doesn't leave their house much. The "homebody economy" refers to economic activities that do or do not do well when people tend to stay at home, which is exactly what is occurring now with the coronavirus pandemic. Things like online shopping, media streaming services, or cook-at-home meal programs tend to do well when ...


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Since there is no change in consumer preferences, the demand function will not change. The firms supplying skateboards face increased costs due to the wheels being more expensive. This will alter their supply function and thus the equilibrium price in the skateboard market may change, and hence the equilibrium quantity demanded may also change.


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The equilibrium network is smaller than that chosen by a social planner because agents do not internalize network externalities. Vaccination against a contagious disease is a standard such example. Someone who is not vaccinated exposes others to potential infection and prevents others from, say, using public facilities. This is a negative externality for ...


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This is one possible interpretation. Good 2 being removed from the market can simply be interpreted as $x_2 = 0$. In an economic interpretation the good does not simply disappear from the utility function in the sense that preferences do not change, it is just the availability of the good that changes. This is an external condition, so you can simply think ...


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It depends on what you assume the firms know about each other. Under full information / rationality assumptions, with identical firms, second-mover advantage disappears because the first-mover will recognize the credible threat of undercutting, and set P = MC and that will be that. If the firms are not identical (e.g., different marginal costs) then turn ...


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Natural monopolies may exist because the cost structure is such that the market could not sustain two firms. This is usually explained by large sunk costs and relatively small demand - if there were two firms the average cost for at least one would have to be above the equilibrium price. If there are no sunk costs at all - as set forth in the ideal case of a ...


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The diagram above describes a Natural Monopoly. These economies have the characteristic that the long run average costs are decreasing (and hence the LRMC is below the LRAC curve). That is, costs reduce as the firm keeps producing more. *Firms with network effects (e.g. telecom industry) is an example of such an industry. Lets look at 2 cases: Competitive ...


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I think this is a typo in the paper. As far as I see, the houses $\{h_5, h_6, h_7\}$ are not occupied, so it should be that $H_V = \{h_5, h_6, h_7\}$.


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Capping prices at a low level permanently would presumably lower supply in the long term, but that is not germane to this question. I will attack a slightly narrower version of this question: does capping prices in an emergency lower investment? I would argue that the definition of “emergency” means that it is short term, and activity is disrupted. It is ...


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Depends what exactly is the authors definition of “radical markets”. A predominant consensus in the economic field is that a mixed economy which relies predominantly on market form of organization but also has government stepping in correcting major market failures and some macroeconomic management is economic system that delivers the greatest amount of ...


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There are various important social benefits of commodity trading even just on paper. The main ones are risk management, hedging, providing liquidity and secondary market, and price discovery. For example, both producers and customers of commodities can use future market to hedge risks of adverse price movement. For example, in market for potatoes the ...


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That is correct. \$50 would be counted towards consumption, and the rest would be counted as investment (inventory).


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In recent times, capital markets have been looking to central banks to bail them out if they get into trouble. So if confidence is lost that they cannot, well, yes that can trigger a crash that may lead to a complete no confidence in a particular currency and thereby the loss of its purchasing power. But losing faith in central banks is not the only risk ...


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