Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

Consider a typical village money lender in a loan market where competition among money lenders drives the rural rate of interest to a point where each lender on average earns zero expected profits (over and above the opportunity cost of funds to lenders). Suppose the typical moneylender has 200,000 yuan to lend out to farmers in the village and the opportunity cost of his funds (what the lender can get if he puts his funds in the bank) is 15% per annum. A) Suppose there is no risk of borrowers defaulting on their loan (i.e. the probability of repayment, p=1), what will be the prevailing interest rate that will be charged to farmers in the village? (hint: calculate the moneylender's expected profits from making the loan)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9685796

Have any Question?


Related Questions in Microeconomics

Question for each of the following examples draw a

Question: For each of the following examples, draw a representative isoquant. What can you say about the marginal rate of technical substitution in each case? a) A firm can hire only full-time employees to produce its ou ...

Question assume that the demand for diamond rings is q 24

Question: Assume that the demand for diamond rings is Q = 24 - P, and each ring contains one diamond. The marginal cost for DeBeers of mining a diamond is $2, and an independent retailer's marginal cost of retailing is $ ...

Question you are buying a car for 20000 with 4000 down

Question: You are buying a car for $20,000 with $4,000 down payment. You will pay for the remaining amount with 30 equal monthly payments with interest at 12%, compounded monthly. How much is your monthly payment? The re ...

Question 1 what market structure best describes the

Question: 1. What market structure best describes the environment within which your organization operates? What challenges and opportunities would arise from higher and lower degrees of government intervention? 2. Accord ...

Question draw the representative firmmarket graph of a

Question: Draw the representative firm/market graph of a perfectly competitive market in long-run equilibrium. Be sure to include and label all necessary curves. (a) Suppose the market demand curve shifts outwards, descr ...

Question using the small open economy model illustrate and

Question: Using the small open economy model, illustrate and describe the likely effects of an economic crisis on a country's trade performance and balance of payments? The response must be typed, single spaced, must be ...

Question consider the following parameters that describe an

Question: Consider the following parameters that describe an economy: C = 50 + 0.8YD I = 70 G = 200 TR = 100 t = 0.2 a. Calculate the equilibrium level of income and the multiplier in this model. b. Calculate the budget ...

Question many critics of government programs to help low

Question: Many critics of government programs to help low income individuals argue that these programs create a poverty trap. Explain how programs such as TANF, EITC, SNAP, and Medicaid will affect low-income individuals ...

Question market price is 50 the firms marginal cost curve

Question: Market price is $50. The firm's marginal cost curve is given by MC = 10 + 2Q. a. Find the profit-maximizing output for the firm. b. At this output, is the firm making a profit? Explain your answer. The response ...

Question draw two graphs one with the lras curve and the

Question: Draw two graphs, one with the LRAS curve and the other with the SRAS curve. Describe the impact an increase in aggregate demand will have in each situation, and show it graphically. The response must be typed, ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As