Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers. In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly. The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower. G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

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Answer 1

Question

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

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Labor Market Data Price $5 $10 $15 $20 $25 3,000,000 6,000,000 9,000,000 12,000,000 15,000,000 Qd 15,000,000 12,000,000 9,000,000 6,000,000 3,000,000 Price $30 $25 $20 $15 $10 $5 + +- x- 3 6 Do + + F 9 12 15 Quantity (In millions) Area of a triangle = 1/2* base *height Market Efficiency & Total Surplus Worth Publishers SCENARIO: The state government is considering raising the minimum wage from $15 per hour to $20 per hour over the next 3 years. As an economic advisor to the governor, you have been asked to provide a recommendation on whether the minimum wage should be increased based on economic theory. Consider the labor market data provided. Prepare a brief report that: 1. Explains whether the labor market is currently efficient at the equilibrium wage of $15 per hour. How would you know? At equilibrium, what (dollar amount) is the Total Surplus this market provides? Show your rationale with numbers. 2. Analyzes the impact on total surplus in the market if the minimum wage is raised…

Answer 2

Question

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

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Answer 3

Question

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

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Answer 4

Question

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

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Answer 5

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

Answer 6

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

Answer 7

Chapter 10, Problem 1QFT

To determine

Concept Introduction:

Market Inefficiency: It is a situation in which there is lack of information between buyers or sellers.

In case of loanable fund market, inefficiency generally means that the market price does not highlight the information regarding demand and supply correctly.

The borrower faces constraint to get loans from the bank because bank has certain criteria for providing loans. On the other hand banks lack information about the credibility of the borrower.

G Bank: The main function of the bank is to provide loans to the poor people without any legal obligations and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Answer 8

Expert Solution & Answer

Answer to Problem 1QFT

The inefficiency that G bank has exploited is accessibility of loans, loan repayment default, and borrowing constraint. The major source of inefficiency is the borrowing constraint.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Inefficiency Exploited by G Bank

There is much inefficiency that G bank has exploited. Some of them are:

It ensures that the loans taken by the group members are repaid without any legal obligations and credit history of the person.

It also takes financial responsibility of the person who borrows from such banks and gets into some difficult situation.

If all the members repay the loan at the right time then they are offered a large amount of the loan.

It provides loans not on the basis of the current price rather than the amount of the repaid loan by its member.

Source of Inefficiency:

The major source of inefficiency in such markets is the lack of communication between borrowers and lenders.

It is because the needs of borrowers are not fulfilled by the bank due to the borrowing constraints like collateral assets and credit history.

Answer 12

Ch. 10.A - Prob. 1P Ch. 10.A - Prob. 2P Ch. 10.A - Prob. 3P Ch. 10 - Prob. 1QFT Ch. 10 - Prob. 2QFT Ch. 10 - Prob. 3QFT Ch. 10 - Prob. 1P Ch. 10 - Prob. 2P Ch. 10 - Prob. 3P Ch. 10 - Prob. 4P

Answer to Problem 1QFT

Explanation of Solution

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Chapter 10 Solutions