ECON 5335 Chapter 14

Which of the following would depress the price of primary products in the world market?

Engel's Law

In addition to moving toward competitive markets and market-determined prices, a centrally planned economy must do what else to transition to a market economy?

Establish property rights and a legal system to enforce those property rights

Which of the following tasks is NOT part of the transition from central planning to a market economy?

Establishing a currency union with another market economy

_____ is typically an important characteristic of a country with a low per capita income.

More barriers to lending of money to the most productive uses for that money

Which of the following is NOT a reason why cartels often lack success over the long term?

Non-members of the cartel seeking to become members of the cartel.

Why are capital markets in developing countries generally less efficient than capital markets in industrialized countries?

There are more barriers to lending because property rights in those countries are not as well-defined as they are in industrialized countries.

How has technology affected developing countries' ability to export primary products?

Improved technology has led to the development of man-made alternatives to primary products and depressed prices of some primary products.

Why would an oil cartel be in favor of lower oil prices, at least for a short period of time?

Lower oil prices will force marginal, non-cartel producers of oil out of the market.

Engel's law says that as per capita income rises

demand for staples increases proportionately less than income is increasing.

New human-made substitutes for primary products

depress the relative prices for the primary products.

A country with low to moderate income per capita is considered to be a(n)

developing country.

Arguments in favor of a developing country using import-substituting industrialization include all of the following except

evidence indicates that countries with outward-oriented policies that emphasize increased exporting tend to grow faster.

In developing countries, the wage gap between expanding sectors within the countries and the declining sectors is

greater than in industrialized countries.

In developing countries, per capita income

has risen on average since 1990 at a rate faster than the growth in industrialized countries.

Encouraging the development of industries that will allow a country to reduce its dependence on foreign production even if it means that export industries are de-emphasized is

import-substituting industrialization.

Many developing countries have comparative advantages based on

land, natural resources, and unskilled labor.

OPEC countries

often face pressures to increase oil production above the levels established by the cartel.

A criticism that developing countries have about developed countries is that developed countries urge the adoption of free-trade policies

but do not always enact or enforce free-trade policies themselves.

The comparative advantages that many developing countries have logically led them to exports of

primary products and products based on primary products.

International cartels in primary products other than oil are unlikely because

production of most primary products is widely distributed, and a cartel in most primary products would be subject to competition from non-cartel countries.

One of the important factors related to developing countries which discourages the investment in new assets is that

property rights are less-clearly defined than in developed countries so that investors cannot be as confident in their title to assets as they would be in developed countries.

For a cartel that controls part of world production, the optimal price markup will be higher with

relatively more inelastic demand.

The primary cause of the collapse in oil prices in 2009 was

the recession that accompanied the global crisis.

For a typical developing country, _____ are primary products such as agriculture, forestry, fuels, and mineral products.

traditional exports

If a developing country's export of a product is large enough, the country can

use an export tax to increase its benefits from the export of that product.