Country A and country B are the same except country A currently has more capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then
a. output in country A increases by more than in country B.
b. output in country A increases by the same amount as in country B.
c. output in country A increases by less than in country B.
d. None of the above is necessarily correct.
c
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How do advocates of discretionary stabilization policy view frequent changes in spending and tax policy?
a. The changes make the economy more difficult to forecast. b. The changes make life more difficult and hectic for Congress and the Fed. c. The changes smooth out the business cycle, making planning easier. d. The changes cause more instability in the economy and make planning more difficult.
The theory of consumer choice
a. underlies the concept of the demand for a particular good. b. underlies the concept of the supply of a particular good. c. ignores, for the sake of simplicity, the trade-offs that consumers face. d. can be applied to many questions about household decisions, but it cannot be applied to questions concerning wages and labor supply.
The short run is the time period
A. In which only the amount of capital may be altered. B. Over which an investment decision can be made. C. In which some costs are fixed. D. Necessary so that profits can be earned from production.
Suppose a new law makes illegal the sale of a good that had been legal. This will
A. eliminate deadweight loss. B. decrease producer surplus. C. increase consumer surplus. D. increase producer surplus.