Exam 7: The Price System: Signals, Speculation, and Prediction

Futures markets are common in commodities, financial instruments, and:

The best known prediction market is the:

Brazil is the largest producer and consumer of ________ in the world.

The great economic problem is to:

When gasoline prices are high, oil refiners have an incentive to pull every last drop of gasoline out of a barrel of crude. This implies that an increase in the demand for gasoline will cause a(n) ______ quantity supplied of gasoline and ______ the supply of the remaining crude oil products.

Both ethanol and sugar are made from sugar cane and ethanol can be used as a substitute for oil. As the price of oil increases, Brazilians shift sugar cane from sugar production to ethanol production, thereby:

If you worked for a Hollywood prediction market that forecasts opening-weekend film revenues, what factors should you consider, in your forecast? I. the number of screens at movie theaters in the country II. the popularity of the cast of the movie III. the movies special effects budget, and its director and producer

A future is a standardized contract to buy or sell specified quantities of a commodity or ________ at a specified ________.

The information problem for a central planner refers to the fact that he/she may not always know how to allocate resources to their highest value use.

In a ―successful‖ market, there will be:

Sales teams have little incentive to report low sales projections to their CEOs-predictions markets help to overcome this problem.

The market solves the incentive problem when allocating resources because the:

In a free market, there are no unsatisfied wants at the equilibrium price.

After a hurricane knocks out power to thousands of households, the price of electric generators increases threefold. According to economists:

In which of these instances does price function as a signal in the market?

Speculation is defined as:

The text states: ―The great economic problem is to arrange our limited resources to satisfy as many of our limited wants as possible.‖ How does a market achieve this goal?

The market acts like a computer because:

How do speculators mitigate shortfalls in the equilibrium quantities traded in markets?

Which of the following factors contribute to the increased speed of trade across countries? I. profit opportunities for sellers II. better transportation networks III. increased cooperation among countries