Question

This is a 4 part question. There are 4 multiple choice questions. Please answer each one.

1. Effective cooperation in an economy characterized by extensive specialization requires above all else:

A Price Controls

B Flexible government controls

C Highly trained economists to fine tune the economy

D High unemployments to stem inflation

E A Rapid Exchange of information

2. The "miracle" of the market, as addressed in your text, refers to the fact that countless goods and services of great complexity are made abundantly available:

A with no systematic or scientific way of explaining how it happens.

B with a minimum number of errors and mistakes.

C with few losses and bankruptcies.

D under conditions of massive ignorance.

3. Transaction costs in economic theory are:

A the opposite of opportunity costs.

B all unnecessary and wasteful costs.

C The costs of arranging agreements between demanders and suppliers.

D not real cossts because they make no positive contridubion to economic transactions.

E any nonmonetary costs associated with a transaction.

4. Legal ceilings on the rate of interest that may be charged to individuals:

A accomplish none of these answers.

B help assure that credit is allocated according to need rather than ability to pay.

C make it easier for people with poor credit to obtain loans.

D accomplish all these answers

E reduce the probability that corporations will obtain scarce credit by bidding funds away from consumers.

Answer 1

1)effective cooperation in an economy characterized by extensive specialization is the characteristics of division of labour which Adam Smith talks of.It requires rapid exchange of information to build up ones skills.

So our and is E

2)/miracle of market is that goods and services of great complexity are made available without much knowledge , even though people do not know each other.

So answer is D , under the conditions of massive ignorance.

3)transaction cost is the cost incurred to bring the goods to market

So answer is C..cost of arranging agreements between demanders and suppliers

4) legal ceilings on interest rate is the maxum interest rate that a financial institution charges on the borrowers.the main reason behind capping of interest rate is to outreach wider economy.

So our answer is D..accomplish all the options viz.

Option B,C &E