Financial Markets
What's the basic difference between a stock and a bond?
Stocks represents ownership (equity) in a company, while Bonds represents debt
My landlord just raised my rent by $300/month because a Raising Canes opened nearby. Is that legal?
What is a positive externality? (or: What is a spillover effect?)
How many Federal Reserve districts are there in the United States?
12
In this market structure, there are many sellers offering identical products and no single seller can influence price.
What is perfect competition?
This theory says countries should produce what they're best at.
Comparative advantage
Which of the major US stock market indices (Dow, S&P 500, NASDAQ) are primarily focused on tech
NASDAQ
Why does the EMU charge $5 for the same water bottle that is $1 at Winco? Are they allowed to do that?
What is price discrimination? (or: What is market power?)
Highest rate of unemployment during the pandemic?
14.7%
This term describes the additional satisfaction a consumer gets from consuming one more unit of a good.
What is marginal utility?
This type of trade barrier restricts the quantity of a good that can be imported
A quota
What does it mean for two assets to be negatively correlated, and why does it matter for a portfolio?
When one asset's price goes up, the other tends to go down.
Jon Davis said the government giving everyone $2000 would actually create more than $2000 of value in the economy. Is he lying to me?
What is the multiplier effect?
If a Pigouvian tax exactly equals the marginal external cost, what happens to deadweight loss?
It is eliminated (efficient outcome achieved).
This type of good benefits everyone and it is impossible to exclude non-payers from using it — like national defense.
What is a public good?
This curve illustrates the tradeoff between producing two goods, forming the basis of gains from trade.
The production possibilities frontier
What role does a market maker play?
Provide liquidity & profit from the bid-ask spread
A company near me is selling below cost on purpose to destroy competitors then planning to raise prices later. Surely, that can’t be legal??
What is predatory pricing?
What condition ensures no deadweight loss from taxation?
Perfectly inelastic supply or demand.
In the long run, a perfectly competitive firm earns zero economic profit because of this force that brings new firms into the market.
What is free entry?
This model, developed in the 1980s, explains intra-industry trade through economies of scale and product differentiation rather than factor endowments
Monopolistic competition model / What is the Krugman new trade theory
Which struggling online shoe retailer recently pivoted to be an AI Infrastructure provider, sending their stock up 600%?
AllBirds
I keep hearing "the Fed raised rates" and my mortgage just got more expensive. How does some geriatrics meeting in a room affect MY house??
What is monetary transmission mechanism?
What key assumption must hold for the Coase theorem to result in efficient outcomes regardless of initial allocation?
Zero (or negligible) transaction costs
A binding price ceiling set below the equilibrium price causes this specific market condition, where quantity demanded exceeds quantity supplied.
What is a shortage
This phenomenon occurs when a small country's tariff has no effect on world prices, meaning the entire burden falls on domestic consumers
The small country assumption