Suppose That You Desperately Need a Grade of "A" from Your

question 41

Essay

Suppose that you desperately need a grade of "A" from your International Finance course and further suppose that it depends upon the grade that you will get from the term paper that you write on PPP. Let's assume that you know that your teacher believes that PPP holds anytime anywhere. What kind of evidence would you submit that would indicate that PPP holds? In other words,what kind of countries and data would you choose for your analysis to bias the empirical results regarding PPP?

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Definitions:

Diseconomies of Scale

A condition in which a firm’s average costs increase as production increases.

Returns to Scale

The change in output as a result of proportionately changing all inputs in the production process, indicating increasing, constant, or decreasing returns.

Marginal Cost

An uplift in the sum total of costs incurred by producing another unit of a product or service.

Average Fixed Cost

The fixed costs of production (such as rent and salaries) divided by the number of goods produced; it decreases as output increases.