Explain what is meant by capital flight. How would you distinguish capital flight from the normal desire of investors to diversify their portfolios by investing abroad?
What will be an ideal response?
Students should show that they understand capital flight as discussed in the chapter.
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Refer to Scenario 4 . Assume that the state originally spent one-half of its budget on schools and one-half on prisons
What was the production of schools and prisons? Could the same number be achieved after the price of producing prisons falls to $1.5 million and the price of producing schools rises to $2 million? Explain.
Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour. b. the improvement in his grades from studying minus the enjoyment of watching TV. c. the enjoyment he would have received if he had watched TV with his friends. d. zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.
Two firms, Acme and FirmCo, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below.ProcessABCDE(smoke/day)(4 tons/day)(3 tons/day)(2 tons/day)(1 tons/day)(0 tons/day)Cost to Acme ($/day)$750$800$1,000$1,400$2,000Cost to FirmCo ($/day)$500$750$1,200$2,200$4,000 Suppose the firms are both currently using process A. If the government requires each firm to reduce pollution by 20 percent, then the total cost to society of this policy will be ________ per day.
A. $1,550 B. $950 C. $300 D. $2,350
There are two conditions necessary for a consumer to maximize her utility. One is that the marginal utilities per dollar spent on each good and service consumed are equal. What is the other condition?
A) Total spending on all goods and services must equal the amount available to be spent. B) The consumer must be satisfied with the choices she makes. C) The total spent on each good and service is the same. D) The prices of each good and service consumed must not be too high.