Open Market Operations

question 31

Multiple Choice

Open market operations

• A)lack flexibility because only very small purchases or sales may be carried out in any given month.
• B)lack flexibility because open market purchases cannot easily be offset by subsequent open market sales.
• C)are more flexible than other policy tools.
• D)may be carried out only on the third Friday of each month.

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Definitions:

Natural Monopoly

A market condition in which a single firm can supply a product or service to an entire market at a lower cost than could two or more firms, often due to economies of scale.

Price Elasticity

The degree to which the quantity demanded of a good changes in response to a change in its price.

Marginal Cost

The financial impact of producing another unit of a product or service.

Monopolist

An individual or firm that is the sole supplier of a particular product or service, giving them significant control over the market price.