8

The dutch disease is when an economy is so dominated by a single export industry that the success of that industry drives up the currency and makes the exports of other industries un-competitive. This drives some of the firms making other goods out of business. Continuing this cycle can lead in the short term to even greater concentration of the economy in ...


6

According to David Ricardo's theory of comparative advantage, all regions should pursue specialization to an equilibrium point. Beyond that point it would not be rational to continue developing a given industry. That being said, many regions have seen their prosperity rise and fall as they "lost" their comparative advantage (especially in modern times as ...


5

First, let's be clear what we mean by abuse of dominance: this is when a firm is a monopoly or near-monopoly, and attempts to use that position in order to perpetuate or enhance its dominance of the market at the expense of competition. So we need to know: why would a market with a monopoly perform worse than one with competition. Here are the main typical ...


5

In international trade, this is called immiserizing growth. This occurs when a major producer of a commodity, call it coffee, produces so much coffee that it drives down the price of coffee faster than the rising quantity can make up for it. (This happens when the demand for coffee is "inelastic.") Then the country is worse off then BEFORE the increase in ...


2

Secure property rights are a prime determinant of long-term economic growth--without them your citizens will be underinvest and, ultimately, waste resources trying to protect the property they already have when they could be using it more productively (Think: Blood diamonds). That's basically the problem with a city where much of it is controlled by gangs... ...


1

In this context 'market' usually means some allocation mechanism. For example free market, or a market where someone has monopoly power. Allocation of goods and resources can be done in other ways: e.g. you can divide all resources evenly among production processes and all goods evenly between consumers. This will generally result in allocative inefficiency (...


1

A market failure is when some economic structure prevents the market from achieving optimal efficiency. A critical part of how the market tends toward its optimal efficiency is via competition. If there is no situation where more than one company could be profitable, you would have a monopoly but it wouldn't be a market failure, since that's the best you ...


1

I would say that a "shoe event horizon" could be possible with other products. A positive feedback loop that cannot be interrupted(easily). Management Event Horizon There is an incentive when the pool of directors and upper level management is small to reduce the number of managers. This leaves more money for the remaining managers. The incentive to remove ...


1

This refers to the discussion on whether bubbles exist or not (look at the previous year nobel laureate's talks). If you believe that bubbles might exist, the following can be the (simplified) story. Take the Spanish housing market, under the Euro bubble. We saw that financed through low prices, an over investment into houses happened, paying workers in ...


Only top voted, non community-wiki answers of a minimum length are eligible