Consider two economies: A and B. Economy A is located close to the equator and is characterized by an extreme climate. The terrain in economy A is inhospitable and it lacks rivers or other water bodies in its territory
On the other hand, economy B is located in the temperate zone with a pleasant climate, fertile soil, and navigable rivers. Suppose the geography hypothesis of economic growth holds.
a) Which of the two economies is likely to be more prosperous?
b) Is the difference in prosperity between the two economies likely to be sustained in the long run?
The geography hypothesis claims that the differences in geography, climate, and ecology are ultimately responsible for the major differences in prosperity observed across the world.
a) If the geography hypothesis holds, economy A is likely to be less prosperous than economy B. This is because the productivity of different factors of production will be lower in economy A due to the extreme weather conditions and inhospitable terrain. The absence of rivers is likely to make transportation and trade expensive. On the other hand, economy B is characterized by geographical conditions that are conducive to development. Therefore, economy B is likely to be more prosperous in the long run.
b) Yes, the difference in prosperity is likely to be sustained in the long run. This is because the geography of a nation does not change over time and so, economy A is likely to be at a permanent disadvantage.
You might also like to view...
How do most people respond when their disposable income increases?
a. They spend all of the increase. b. They save all of the increase. c. They save some and spend some. d. They neither spend nor save.
Which statement is false?
A. Before the Civil War about three quarters of the farms of over 500 acres were located in the South. B. The great abundance of land was the most influential factor in the United States' economic development during the 19th century. C. Although the percentage of Americans living on farms has declined substantially over the last 70 years, the actual number of people living on farms has remained constant. D. None of the statements are false.
Refer to the table above. Which of the following statements is true about the marginal product of labor?
A) The marginal product initially decreases with the first few workers and then increases. B) The marginal product initially increases with the first few workers and then decreases. C) The marginal product decreases as more workers are hired. D) The marginal product increases as more workers are hired.
"A decrease in the price of tablet computers will decrease the demand for desktop computers." This statement is an example of a normative economic statement
Indicate whether the statement is true or false