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15

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 difference in material costs without losing too much money. But why would they want to lose any money at all? Logistics. Keeping track of the different prices per ...


12

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 America for which data is available on four alternative indices of corruption (two from Transparency International, one is the Business International index, ...


11

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 corresponding buyer right now), (iii) will sell to any buyer at the high quoted price (even if there is no corresponding seller) right now. This injects liquidity into the ...


10

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 good or service causes additional positive or negative externalities on a third party not involved in the economic activity". Externalities are but one example ...


10

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 fabrication as well as precisely manufactured consumables like processed chemicals and auto-parts. Chinese goods are ubiquitous because they are skewed towards final ...


6

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. Inflation is primarily a direct function of the money supply, and an inverse function of total production. If corruption takes the form of corrupt bank lending, ...


6

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, whereas Belgium successfully handled identical debt relative to GDP. What determines the highest debt that a country could repay, defined as “fiscal limit?” ...


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

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 made of metal, which is not in infinite supply. If you use metal to produce a can of air then you must take that metal away from production of, say, airplanes ...


5

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 complete regardless of its market structure. So you can have complete market dominated by monopoly, or oligopoly or monopolistic competition etc. Perfectly ...


5

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 - volume available, flexibility of that volume, demand, storage, and so on. This leads to different prices.


5

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, because the market clearing macroeconomic equilibrium always depends on real and also in short run nominal factors which constantly change. Hence it does not make ...


4

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 companies, is equal to the share price multiplied by the number of shares in circulation. In theory, for both listed and unlisted companies, the worth of a company is ...


4

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, although it used to be the case almost everywhere) then the only thing that can make people trust that money will not lose its value through extreme printing of ...


4

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 based on cost-benefit analysis, when social (net) cost/benefit = private (net) cost/benefit then private actors in a market will make the socially optimal decision....


4

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 between the benefit of the reduced pollution and the loss to the pharmaceutical firm from the reduced production. But this last figure is small: at the competitive ...


4

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 Common-pool resources. Examples of Common-pool resources is fisheries, forests, groundwater basins, oil fields and so on. Unlike pure public goods, common pool ...


4

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 use weighted edges ("bandwidth") to model economic phenomena. I'm not aware of work making use of the concept of latency, except when literally modelling ...


4

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 what is occurring now with the coronavirus pandemic. Things like online shopping, media streaming services, or cook-at-home meal programs tend to do well when ...


4

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 292) in some passages even defines monopolies in relation to their cost function: When a firm’s average-total-cost curve continually declines, the firm has ...


3

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 transactions only occur at the market price, but ignoring all other intentions is too restrictive to define a market. For example, stock exchanges often give ...


3

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 Venezuela created a two-tiered official exchange rate system. Imports designated as "non-essential" receive a rate of 4.3 bolivares per dollar, and "essential" goods ...


3

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 $\alpha$ below 2. ($\alpha=2$ corresponds to the normal distribution.) To be honest, I'm not sure how this was an application of "fractals" where previous ...


3

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, like Ukraine 2011-2013. Quoting Wikipedia: In 2014's Transparency International Corruption Perceptions Index Ukraine was ranked 142th out of the 175 countries ...


3

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 firm in a competitive market is the same" we simply need to find one counter-example, such as the one given below: Suppose there are two firms in the market and ...


3

There is a school of thought that says that people unconsciously use cost-benefit analyses in their relationships with other people. In this idea, people show kindness only because they anticipate getting rewarded for those acts, so it is in their own self-interest to do so. Monetizing small tasks takes time, and then collecting money for tasks done takes ...


3

A stock represents a quantity measured at one specific point in time, which may have accumulated in the past. According to the Bureau of Labor Statistics, the US unemployment rate stood at 4.1 percent in February 2018. This represented a stock of 6,706,000 unemployed workers in February 2018. But from January to February, we observed a flow of workers ...


3

Public information about prices--not necessarily about costs or willingness to pay--is indeed the key here. If S5 is willing to sell to B5 at $1, she must also be willing to sell to any other buyer at this price. Given the low price, there would be an over-demand for the unit sold by S5, and a resulting upward pressure on the price asked by S5. Similarly,...


3

Depends what exactly is the authors definition of “radical markets”. A predominant consensus in the economic field is that a mixed economy which relies predominantly on market form of organization but also has government stepping in correcting major market failures and some macroeconomic management is economic system that delivers the greatest amount of ...


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