What is marginal cost? How is it measured?
What will be an ideal response?
Marginal cost is the opportunity cost of producing one more unit of a good or service. Along a PPF marginal cost is reflected in the absolute value of the slope of the PPF. In particular, the magnitude of the slope of the PPF is the marginal cost of a unit of the good measured along the x-axis. As the magnitude of the slope changes moving along the PPF, the marginal cost changes.
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Critically evaluate the following statement. "Only poor nations face scarcity. Rich nations have everything they need and have therefore conquered scarcity."
What will be an ideal response?
According to the rational expectations theory, expansionary monetary policy will
a. reduce inflation. b. lead to inflation and the higher rate of inflation will be quickly anticipated. c. reduce unemployment because people will generally underestimate the inflationary side effects of the monetary expansion. d. accelerate inflation in the short run, but in the long run the primary effect will be an increase in employment.
The most important determinant of a nation's rate of economic growth may be ____.
Fill in the blank(s) with the appropriate word(s).
When building a model, an economist must:
A. adjust for exceptional situations. B. provide a complete description of reality. C. make simplifying assumptions. D. develop a set of behavioral equations.