It has been said that “Prices are like giant neon billboards that flash important information.” Describe the types of information that market prices provide.
Answer to relevant QuestionsIn this and the last chapter it was noted that “Profit opportunities attract firms like sharks to blood.” ExplainWhat is an “externality”? Why might it create a problem for market allocation?What is adverse selection? What is moral hazard? Give an example of these two problems arising between a firm and its suppliers. What is the purpose of corporate governance?Describe the efficiencies and the inefficiencies that occur with a top-down (hierarchical) management structure.
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