Comment on how extractive institutions affect:
a) the return-to-entrepreneurship schedule.
b) the opportunity cost of entrepreneurship schedule.
What will be an ideal response?
a) By creating insecure property rights and limiting legal back up, extractive institutions make entrepreneurship less profitable and shift the return-to-entrepreneurship schedule leftward.
b) By creating entry barriers, extractive institutions make entry more costly and shift the opportunity cost of entrepreneurship schedule upward.
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Suppose there are two market structures: A and B. Market A is characterized by free entry and exit of firms and firms under this structure face a horizontal demand curve. Market B has only one seller. Identify the market structures
Comment on the pricing mechanism, long-run profitability, and social surplus under both market structures.
Since an individual spends a small share of the income on salt, the elasticity of demand is likely to be low.
Answer the following statement true (T) or false (F)
Explain how the prisoners' dilemma can be used to examine pricing strategies in an oligopoly
What will be an ideal response?
Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?
A) 17 percent B) 10 percent C) 7 percent D) 3 percent