Explain the difference between consumption and capital goods
What will be an ideal response?
A difference lies in the identity of the purchaser. Consumption goods (and services) are purchased by households and investment goods are purchased by firms. Households buy consumption goods to use for personal enjoyment. They contribute to the person's standard of living. Firms buy capital goods to use as a factor of production. Capital goods are used along with the other factors of production, to help produce additional goods and services.
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Inflation might lead to ________ because ________
A) lower demand for stocks; of tax distortions B) lower demand for cash; money does not typically yield interest C) uncertain or uneven demand for goods; higher fluctuations in relative prices make it harder for consumers to compare among goods and make rational consumption decisions D) all of the above E) none of the above
If a life can be saved for $250 using Method A and $260 using Method B,
a. it would be efficient to shift resources from A to B b. it would be efficient to shift resources from B to A c. both methods should be pursued to the maximum extent possible d. neither method should be used if methods with higher dollar values are available e. both methods are on the economy's production possibilities frontier
Assume that an industry requires a very specialized technology that involves high start-up costs for new firms no matter what level of output they produce. In the long run, at low levels of output, these firms will tend to exhibit
a. diminishing marginal returns b. increasing marginal returns c. diseconomies of scale d. constant returns to scale e. economies of scale
California passed a law called "Proposition 2 1/2" that limited property taxes to 2.5 percent of property value. Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents. This windfall could be called an economic rent only if
a. we push the definition of economic rent too far. b. the supply of rental units can be expanded. c. the supply of rental units is fixed. d. competitors can build housing at costs that yield the return that was earned before the tax cut.