Final answer:
In a T-bill auction, a competitive bidder is guaranteed a maximum price, while a noncompetitive bidder is guaranteed a given quantity of T-bills. The equilibrium price and quantity in trade are determined by the intersection of supply and demand curves, reflecting market conditions.
Step-by-step explanation:
In the T-bill auction process, there are two types of bidders: competitive and noncompetitive. A competitive bidder is guaranteed a maximum price - they specify the price they are willing to pay and if the market price is lower or equal to their bid, they get the T-bill at the market price, which might be lower than what they bid but never higher. A noncompetitive bidder is guaranteed a given quantity of T-bills. They accept the average price of the accepted competitive bids and are assured of receiving the amount they desire, without the need to specify a price.
When determining the equilibrium price and quantity in each country if trade is allowed, you look for the point where the supply and demand curves intersect. This intersection indicates the price at which the quantity supplied equals the quantity demanded. In the context of international trade, the equilibrium price would adjust based on the combined supply and demand from both countries involved, leading to a new equilibrium that reflects the total market conditions.