Author Question: Refer to Figure 19-8. The equilibrium exchange rate is originally at A, 1.25/euro. Suppose the ... (Read 171 times)

Melani1276 · **on:** Jun 29, 2018

Refer to Figure 19-8. The equilibrium exchange rate is originally at A, 1.25/euro. Suppose the European Central Bank pegs its currency at 1.00/euro.

Speculators expect that the value of the euro will rise and this shifts the demand curve for euro to D2. If the European Central Bank abandons the peg, the equilibrium exchange rate would be
A) 1.00/euro. B) 1.25/euro. C) 1.50/euro. D) 1.75/euro.

Question 2

What is meant by the term economic efficiency?

What will be an ideal response?

Jane · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

Economic efficiency refers to a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.