What will happen if the institutions in an economy transform from inclusive to extractive?
A) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will decrease.
B) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will decrease.
C) The return-to-entrepreneurship schedule will shift rightward, and the opportunity cost to entrepreneurship will increase.
D) The return-to-entrepreneurship schedule will shift leftward, and the opportunity cost to entrepreneurship will increase.

Question

Quizplus · Accepted Answer

When institutions transform from inclusive to extractive, the protection of property rights is weakened, and the cost of entrepreneurship increases. This leads to a leftward shift in the return-to-entrepreneurship schedule and an increase in the opportunity cost to entrepreneurship. Therefore, option D is the correct answer.

What Will Happen If the Institutions in an Economy Transform