The Dictator of Turan Has Recently Begun to Arbitrarily Seize

question 45

Multiple Choice

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, what would we expect to happen to the growth rate in Turan?

• A) It will fall temporarily, but will return to where it was when the new owners learn how to farm.
• B) It will increase because the total amount of human capital in the country will increase as the new owners learn how to farm.
• C) It will fall and remain lower for a long time because other farmers may expect their farms to be seized as well, and therefore they do not improve their farms.
• D) It will increase because friends can better cooperate with each other, avoiding wasteful competition.

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Definitions:

Long Run

A period where all inputs or factors of production can be varied, allowing full adjustment to changes in the market or economy.

Short Run

A period in economics where at least one input is fixed and cannot be changed by the firm.

Market Price

The price at which a good or service is offered in the marketplace, determined by supply and demand dynamics.

Units

Basic measurement or quantity of a product, used to track inventory, production, and sales in various contexts.