Fears of an Impending Civil War in Baltonia Have Reduced

question 51

Multiple Choice

Fears of an impending civil war in Baltonia have reduced the confidence of potential investors.Assuming all else equal,which of the following is likely to happen in this case?

• A) The demand for labor in Baltonia will fall.
• B) The equilibrium real wage in Baltonia will rise.
• C) The consumption expenditure in Baltonia will rise.
• D) The supply of labor in Baltonia will fall.

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Definitions:

X-Inefficiency

A situation in which a firm fails to utilize its resources efficiently because of a lack of competitive pressure.

Average Total Costs

The total cost of production divided by the quantity produced, representing the per-unit cost of producing a good or service.

Economies Of Scale

Operational scale increases lead to cost efficiencies for businesses, prominently reflecting in reduced production costs per unit as the amount of output grows.

Diseconomies Of Scale

The situation when a firm’s average total cost of producing a product increases in the long run as the firm increases the size of its plant (and, hence, its output).