In 1980, in order to stimulate agricultural production, Fidel Castro allowed Cuban farmers to sell their goods directly to consumers and keep whatever profit they made. Some farmers were earning $50,000 per year, compared with the average worker income of $2,400 . The workers resented this. Castro denounced the farmers as "capitalist gangsters" and closed the free markets. Cuban cash income
declined five percent and fresh vegetables were in short supply. This illustrates the economic concept of the
a. law of comparative advantage.
b. equality-efficiency trade-off.
c. cost disease of the service sector.
d. unemployment-inflation trade-off.
e. All of the above are correct.
b
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What is a market failure?
A) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. B) It refers to a breakdown in a market economy because of widespread corruption in government. C) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. D) It refers to a situation where an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.
Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?
A. The amount he spent, $10. B. Nothing, since he got his preferred choice. C. The Batman T-shirt. D. The X-Men T-shirt.