Consider an economy consisting of traditional cottage industry with perfect competition and increasing returns to scale manufacturing industry where urban dweller's demand may be more concentrated in manufactured goods in which a minimum of workers has to be employed giving rise to a different production functions for both industries. Wage rate may significantly vary between cottage and manufacturing industry along with identical market price. How does industrialization create market failure so that public policy should initiate to swell the process of economic uplift? Even if there is homogeneity of wage rate between traditional cottage and manufacturing industries, Is there any way multiple equilibria may exist when many product sectors invest at a time. Why or why not?

Consider an economy consisting of traditional cottage industry with perfect competition and increasing returns to scale manufacturing industry where urban dweller's demand may be more concentrated in manufactured goods in which a minimum of workers has to be employed giving rise to a different production functions for both industries. Wage rate may significantly vary between cottage and manufacturing industry along with identical market price. How does industrialization create market failure so that public policy should initiate to swell the process of economic uplift? Even if there is homogeneity of wage rate between traditional cottage and manufacturing industries, Is there any way multiple equilibria may exist when many product sectors invest at a time. Why or why not?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter3: Scarcity, Trade-offs, And Production Possibilities

Section: Chapter Questions

Problem 3P

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