Ask an Economist
For example, I am looking at the MRTS of good b for a. Thus, MRTS = marginal product of a / marginal product of b.
Let's say that good a is very productive with a high marginal product, while good b is unproductive and has a low marginal product. This means that the MRTS of good b for a is very high. Thus, a lot of input a must be reduced for a 1 unit increase in input b, to maintain the same level of output.
This conclusion does not make sense to me since I thought that input a was very productive. How come when we increase the unproductive input by 1 unit, we have to reduce a lot of the productive input in order to maintain the same level of output?
The question is based on the definition of the MRTS of B for A as the (the amount of input A)/(the amount of input B), which is flipping the numerator and the denominator of the correct definition, probably because of the definition of...
Steady-state level of output per worker is roughly the same as per capita income in the long run. There is nothing good or bad about it, except countries and their residents enjoy higher standards of living in a material sense if the per capita...
There are several statistical reasons why you would covert the variable into a logarithm. Logarithm transformation, for example, can change a highly skewed variable into a more normalized distribution. It is also useful when you wish to linearize...
Standard theory describes channels through which raising rates affects both demand and supply. Higher rates raise the opportunity cost of spending and thus tend to dampen both business investment and household consumption. All else...
I should be clear that economics cannot provide an answer, but it can help us to organize our thoughts about an answer. The economic concept that is most helpful in thinking about this question is "opportunity cost." That is, the best way to...
Interesting idea. As you note, the idea is extreme, but it addresses some of the underlying causes of high healthcare prices.
Your reasoning likely was that cost reduction for the healthcare providers would lead to price...
You ask, “Is it moral to have their customers pay” by raising prices? Well, let’s ask it this way. Assuming the quality of the product increases because of the investment in the new technology, are customers willing to pay higher prices after the...
I chose the answer that said "Accounting profit is greater than economic profit" because I am under the assumption that there is always an opportunity cost no matter the situation ("No Free Lunch"). However, when I got my test results back, I found that the supposedly correct answer is "Accounting profit is greater than or equal to economic profit." When I asked my teacher about this question, he said that hypothetically in economics there are situations with no opportunity cost.
So my question is: What do you think is the correct answer to this question? In economics, is there ever theoretically a situation where there is no opportunity cost?
Great question. First off, when we’re talking about a firm, be careful with what you label economic (or opportunity) costs: they are the sum of implicit and explicit costs. Accounting and economic cost both consider explicit costs (things like...
You are correct in observing that efforts to limit competition have the potential to produce market outcomes that diverge from the "free market ideal" that economists commonly use as their baseline of comparison. Indeed the desirable properties...
I know you are asking this out of intellectual curiosity and for fun; in the U.S., it is illegal to create any sort of currency. Having said that, you raise an important point. It is easy to "create money" by printing some pieces of paper and,...
Interesting question. The Braves defeated the Dodgers on Oct. 20 (2021) to take a 3-1 game lead in the National League Championship Series and are now just one game away from the World Series. Liberty Media Corporation is an American mass media...
On top of this strange confidentiality of the index, as well as the surprise at "no resource scarcity, we're actually improving", I have a few other reservations.
What it says about resources being virtually unlimited leads me to compare it with that math paradox of the arrow that always covers half of the remaining distance, infinitely, instead of touching the target -the Earth being limited, at some point I think we'd run out even if we optimized our consumption to the molecular level. It also takes into account the richest 10% when trying to show that the average work time needed to buy some basic items across the world has lessened, so we're going better with a bigger population, which doesn't look fair. I also know that among animals, large populations collapse after a while due to lack of resources -but they say it doesn't account for humans resourcefulness (could be a "not for us" bias, but could also be relevant).
Your observation about the lack of material on the Simon Abundance Index is a valid one. Perhaps its newness accounts for a general lack of peer-reviewed material on the subject.
The Simon Abundance Index emanates from the ideas and work...
There are very few places to find county-level farm rental rate information. Iowa State has conducted a long-running survey on farm rental rates. That data is provided in the ISU Cash Rental Rate Map (...
Small business owners who most effectively use economics knowledge to the advantage of their business do so through the lens of unit economics. What are the per-unit expenses of the business and how do those expenses compare to revenues per unit...
John Green, Nicole Swepson, and I recently completed a paper, College Quality as Revealed by Willingness-to-Pay for College Graduates, that addresses this question. First, we examined the correlation between traditional measures of...
You can do a lot of different things with an economics degree so it's a bit of a tough question to answer. Of course, one thing you can do is be an economist. The Bureau of Labor Statistics has an overview of what that kind of position entails...
A seller has market power if it is able to PROFITABLY price higher than the competitive price because it has a downward sloping demand curve and sets its output where marginal revenue equals marginal cost but sets its price above its marginal...
There seems to be two questions here.
- For a couple with kids and highly unequal incomes, what is the best way to make expenditure decisions? (Do both individuals get equal votes? Would that be unfair to the higher-earning individual...
Let's recall that inflation is usually computed as a year-on-year (annual) percentage change in the consumer price index. Therefore, CPI inflation for June 2021 will compare the CPI in June 2021 to the CPI in June 2020. Hence, inflation of say 6....
As is usually the case in economics and economic data analysis, the answer is "it depends."
From a theoretical standpoint "The" interest rate is not really something that exists in the real world, it is more of a conceptual tool that...
My short answer from ten years ago: When consumers are made better off in the short and long run.
My short answer today: That’s a toughie.
My long answer: You have actually hit on a question...
You have described an economic concept called tax incidence. There is a wealth of studies centered around this in the field of public finance. The basic question, similar to what you have articulated, is who bears how much tax burden? There is...
With a major in Economics, one does NOT need to decide on a specific career field until they graduate when they likely will have multiple options to choose from. The Econ degree will prepare graduates for various career paths, even if the...
Q. Whenever a country signs up to an IMF package, there is a sudden increase in inflation which is difficult to control. My question is why does that occur?
A. Countries, usually, approach the IMF as a last resort measure after...
Thanks for your question. I’m glad to hear about your interest in the financial sector. A degree in economics has many different career tracks: a policy analyst in government, a business analyst understanding how prices influence...
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