What Will Happen If the Institutions in an Economy Transform

question 25

Multiple Choice

What will happen if the institutions in an economy transform from inclusive to extractive?

• A) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will decrease.
• B) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will decrease.
• C) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will increase.
• D) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will increase.

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Definitions:

Debt-equity Ratio

Ratio that measures a company's financial leverage by dividing its total liabilities by its shareholder's equity, indicating the balance between debt financing and equity financing.

Direct Bankruptcy Costs

The costs that are directly associated with bankruptcy, such as legal and administrative expenses.

Financial Trouble

Financial trouble indicates a situation where an individual, company, or other entity is struggling to manage or repay their debts or meet financial obligations.

High-quality Employees

Refers to employees who are highly skilled, efficient, and produce excellent work consistently.