The law of increasing additional cost occurs when

A. resources are not perfectly adaptable for alternative uses.
B. there are always shortages in some goods.
C. technology is not used.
D. there are always alternatives and it is costly to figure out which alternative is best.


Answer: A

Economics

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Certain kinds of tropical fruits are impossible to grow outdoors in the United States. Suppose, however, that in order to create jobs in Wyoming, the U.S. government offered extensive subsidies to firms to produce bananas

With the subsidies, firms could build greenhouses and offer the fruit at world prices. A) The United States now has a comparative advantage in bananas. B) The United States has a comparative advantage, but is not competitive. C) The United States is competitive, but does not have a comparative advantage. D) The United States has a comparative advantage and is competitive. E) None of the above.

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In the short-run, a supply shock will lead to

A) movement of prices and output in the same direction. B) movement of prices and output in opposite directions. C) a sustained inflation. D) a movement in prices, but not output.

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A government policy that would reduce the saving rate is

A. giving tax breaks to increase the real return that savers receive. B. switching the tax system to tax consumption instead of income. C. increasing the government budget surplus by cutting government spending. D. eliminating the social security system.

Economics