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Is there a “runaway” threshold for Debt-to-GDP Ratio in the U.S.?

Is there a threshold we can pass in terms of debt-to-GDP that will cause a runaway sort of effect? No there is no threshold or magic number (at least not one we know of). Few years ago there was an ...
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15 votes
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Why isn't the cost of shoes affected by their size?

Most of the price of creating a shoe is the cost of labour to make it and the cost to ship it to the store. The cost of the materials needed to make the shoe is negligible. So, they can ignore the ...
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12 votes
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Can econometrics test for correlation or causality between prices and corruption?

Some related studies: Al-Marhubi, F. A. (2000). Corruption and inflation. Economics Letters, 66(2), 199-202. The analysis is based on cross-country data consisting of 41 countries from Asia and Latin ...
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11 votes
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Are stock exchanges market makers?

No, they are not market makers. A market maker is someone who (i) quotes two prices (one 'low' and one 'high'), (ii) will buy from any seller at the low quoted price (even if there is no ...
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10 votes
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Is market failure constant? What properly defines it?

I have to intervene to say that market failure and externality are not the same thing. So I do not think it is at all correct to define market failure as when "the production or consumption of a ...
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10 votes
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If Germany is the largest exporter, why do Chinese products pervade the the US market?

Intermediate and capital goods used in the production of other goods are often very expensive and made by Germany. Think fancy manufacturing equipment in chemicals, semiconductors, and metal ...
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6 votes

Can econometrics test for correlation or causality between prices and corruption?

While it´s true that there is no direct relationship between corruption and inflation, there are mechanisms which can lead to corruption acting to influence inflation through the monetary system. ...
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6 votes

Access to the markets for a country

When a country loses access to markets they mean access to debt markets. Here is a quote from a paper if you need a citation: Greece lost access to credit markets when debt exceeded 130% of GDP, ...
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5 votes

How can the abuses of monopoly power lead to market failure?

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 ...
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5 votes
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"For a market to exist there must be scarcity" (T/F)

I agree that air is not, in any meaningful sense, scarce. But there is no market in air! There is a market in canned air, but that's different because canned air is most definitely scarce. The can is ...
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5 votes
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Competitive vs complete and non-competitive vs incomplete marekts

Complete market is a market where every possible asset or good can be assigned a price and where you have perfect information, can make perfect contracts and zero transaction costs. Any market can be ...
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5 votes
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Why didn't other oil pricing benchmarks such as Brent go negative?

The Brent price is for oil physically delivered in the UK. The price that went negative if for oil delivered in West Texas, US. The physical and economic conditions at the two places are different - ...
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5 votes
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Properties of Financial Markets in Real Life

Equilibria: in the macroeconomic sense of aggregate equilibrium where all markets clear, markets are most likely never in any equilibrium but rather in constant flux between different equilibria, ...
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4 votes
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Why is food less expensive in India than the United States?

I think your intuition is right that food is cheap there. The Economist Big Mac price index suggests that India has some of the cheapest big macs in the world. More generally, the index indicates that ...
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4 votes

Is market failure constant? What properly defines it?

To answer your other question of what properly defines market failure: The market fails when the socially desirable outcome is not achieved through the market. Since the market decisions are made ...
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4 votes
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What would happen if stock markets were open 24 hours?

You would have trading teams who work shifts like any other 24-hour business areas. The power market is open 24-7; many companies have around-the-clock trading teams. A lot of analysis and other ...
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4 votes
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Why currency purchasing power is linked to confidence in central banks

TL;DR Version: The trust that money has value gives it its value. If money can be exchanged for gold, then this makes people trust that it will have value. If this is not the case (and it is not, ...
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4 votes

What is the wealth of a company?

The "wealth" of a company is not a well-defined term. The worth of a company, its market value, is whatever someone is willing to pay for it. The market's best guess of that value, for listed ...
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4 votes
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Why do externalities lead to a Pareto-inefficient outcome?

If you allow side payments then the issue you identify goes away in a Coase sense. The citizens being polluted could pay for production to be reduced by one unit. This amount would have to be ...
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4 votes
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Is it possible to sell a rival and non-excludable product?

A good is excludable if people can be prevented from using it. If one person is using any rival good then this good won't be available for others. You asked about rival and non-excludable good such as ...
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4 votes

Bandwidth, latency and price

There is an active body of research on network economics. See, for example, Social and Economic Networks by Jackson Connections by Goyal for an introduction to the topic. These models occasionally ...
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4 votes

What is homebody economy?

A homebody is someone who doesn't leave their house much. The "homebody economy" refers to economic activities that do or do not do well when people tend to stay at home, which is exactly ...
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4 votes

Increasing returns, implications?

Provided that increasing returns to scale apply over the whole production function of the company it is likely that it would become natural monopoly. For example, Mankiw in Principles of Economics (pp ...
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4 votes

Black Market Resilience

My syllogism is the following: Going from a paperless, tax-exempted, although illegal business, to a taxed, legal business saturated with paperwork must be a bad bargain for at least a percentage of ...
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3 votes
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What is the difference between 'actual' and 'potential' interaction between buyers and sellers?

The traditional representation of a market, with the curves of supply and demand reflects potential transactions: for each price, we can derive the quantity that would be offered or asked. The actual ...
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3 votes
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Why does Venezuela have such a high Big Mac Index?

It is worth noting that Venezuela has had currency controls in place for quite some time now, so the locals cannot get dollars at the world exchange rate. On January 2010, the government of ...
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3 votes

What are the most recent devopments with applying fractals to economics?

Mandelbrot's original application to cotton prices, The Variation of Certain Speculative Prices, claimed that the price fluctuations followed a Lévy stable distribution with a stability parameter $\...
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3 votes

Can econometrics test for correlation or causality between prices and corruption?

Corruption undermines its country economy, and that eventually causes inflation, but: there are known examples of extreme corruption cohabiting with little to no inflation for some period of time, ...
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  • 159
3 votes

Is the marginal cost the same for every firm in a perfectly competitive market?

No, the marginal cost curves are not necessarily the same for each firm in the market. However the values of marginal costs are. To disprove the general claim that "The marginal cost curve of each ...
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