Suppose Albania is exporting product B, and experienced economic growth biased in favor of product B as seen in the figure above. We are also told that Albania's new consumption point is at point d
Would you still consider the economic growth, which took place biased in favor of B? If Albania were a large country how would this growth affect its terms of trade?
This is a relatively difficult case. On the one hand, the growth is still technically export biased. However, Albania's consumption clearly shifted in favor of its import product, A. In this case, the deterioration in the terms of trade would be much more pronounced than before, and may lead to a case of immiserizing growth. However, for this to occur, there must have been a major shift in the taste patterns (the old community indifference map is not longer applicable). Therefore, when we try to judge the direction and magnitude of the welfare change, we are comparing the old versus new taste preferences, which raises the classic index number problem.
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To economists, the main differences between "the short run" and "the long run" are that
A. the law of diminishing returns applies in the long run, but not in the short run. B. in the short run all resources are fixed, while in the long run all resources are variable. C. in the long run all resources are variable, while in the short run at least one resource is fixed. D. fixed inputs are more important to decision making in the long run than they are in the short run.
Explain what market signaling is?
What will be an ideal response?
The payoff matrix refers to
a. the difference between total revenue and total cost at different price levels b. a listing of the rewards and penalties associated with pursuing various strategies c. the difference between average and marginal cost for the non-competitive firm d. the difference between average and marginal revenue in a non-competitive industry e. the difference between average variable and average total cost to the firm
Consider the market for grapes. An increase in the wage paid to grape pickers will cause the
a. demand curve for grapes to shift to the right, resulting in a higher equilibrium price for grapes and a reduction in the quantity consumed. b. demand curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and an increase in the quantity consumed. c. supply curve for grapes to shift to the left, resulting in a lower equilibrium price for grapes and a decrease in the quantity consumed. d. supply curve for grapes to shift to the left, resulting in a higher equilibrium price for grapes and a decrease in the quantity consumed.