Suppose the Exchange Rate Is Such That 1 U

question 21

Multiple Choice

Suppose the exchange rate is such that 1 U.S.dollar equals 1 euro in New York and 0.9 euros in Paris.An arbitrageur would sell euros

• A)in New York and buy U.S.dollars in Paris
• B)in Paris and buy U.S.dollars in New York
• C)in New York while buying them in Paris
• D)in Paris while buying them in New York
• E)at the same price in both cities

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Definitions:

Competitive Wage Rate

The equilibrium wage set in a market where the demand for labor meets the supply, with no individual employer able to influence the wage rate.

Bilateral Monopoly

A bilateral monopoly occurs when a market consists of a single supplier and a single buyer.

Monopsonist

A market condition where there is only one buyer or a dominant buyer for a product or service, giving them significant power over prices.

Bilateral Monopoly Wage Rate

refers to the wage rate determined in a market where there is only one employer (a monopoly) and one union or employee (a monopsony), necessitating negotiation to reach an agreement on wages.