In the graph, the difference between points d and e indicates that at $50M of R&D spending, the
A. marginal cost is greater than the marginal benefit. Thus, R&D spending should be reduced.
B. marginal cost is less than the marginal benefit. Thus, R&D spending should be increased.
C. marginal cost is greater than the marginal benefit. Thus, R&D spending should be increased.
Answer: A. marginal cost is greater than the marginal benefit. Thus, R&D spending should be reduced.
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Each point on the production possibilities frontier achieves allocative efficiency
Indicate whether the statement is true or false
If a bond dealer sells a government bond to the Fed for $100,000, and the reserve ratio is 10 percent, then the bank that receives a $100,000 deposit from the dealer can expand its loans by ________, and the money supply can increase by as much as ________.
A. $90,000; $900,000 B. $80,000; $800,000 C. $90,000; $1,000,000 D. $10,000; $100,000
A fiduciary monetary system means
A. that money is legal tender. B. that the currency is backed by implicit faith in government. C. that the value of each currency is determined by the amount of gold held by each nation. D. that money has commodity value.
Describe the effects of contractionary monetary policy by the domestic central bank on output, the real interest rate, and net exports in both the domestic and foreign country, using a Keynesian model in the short run. What happens in the long run? Show a diagram to illustrate the short- and long-run effects in both countries.
What will be an ideal response?