The underground economy—the informal sector—can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector?
What will be an ideal response?
Entrepreneurs of the firms in the informal sector limit their investments in capital equipment because they are afraid that the firms will someday be shut down. The workers in the firms, consequently, have less capital equipment to work with.
You might also like to view...
Assume that when price is $20, quantity demanded is 9 units, and when price is $19, quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units?
A) $20 B) $19 C) $10 D) $1
You are given the following risky cash flows and certainty equivalent factors for a four-year project:
Certainty Period Cash Flow Equivalent Factor 1 $2,500 .95 2 3,000 .92 3 4,000 .88 4 3,000 .84 The initial investment for this project is $8,000, and the risk-free interest rate is 6%. Calculate the net present value of the project.