The Difference Between Temporary Factor- Price Differentials and Equilibrium Factor-

question 50

Multiple Choice

The difference between temporary factor- price differentials and equilibrium factor- price differentials is that

• A) only equilibrium differentials are interesting for policy purposes.
• B) the government can only eliminate equilibrium differentials.
• C) temporary differentials are affected by supply and demand whereas equilibrium differentials are not.
• D) temporary differentials lead to, and are eliminated by, factor mobility whereas equilibrium differentials do not.
• E) equilibrium differentials lead to, and are eliminated by, factor mobility whereas temporary differentials do not.

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Definitions:

Pledging Receivables

Borrowing money using receivables as collateral.

Effective Cost

The total cost of a financing option, including all fees and interest, adjusted for any discounts or premiums, providing a true comparison of costs.

Annual Rate

Annual rate often refers to the interest rate for a period of one year, but can also apply to any annualized financial metric intended to allow comparison over a year's period.

Implied Annual Cost

The total cost associated with financing or an investment, expressed on a yearly basis, often calculated through the analysis of implied rates or costs.