Explain the concept of inefficiency in terms of a production possibilities curve.
What will be an ideal response?
A production possibilities curve shows potential output using all available resources efficiently and current technology. If an economy does not use all the available resources efficiently with current technology available to it, then it will produce inside the production possibilities curve. This is referred to as inefficiency.
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To reduce pollution, economists generally prefer a corrective tax to a command-and-control policy because the same goals can be achieved but in an efficient manner with a corrective tax.
Answer the following statement true (T) or false (F)
In the Solow growth model, given the values of A, s, n, and d, the economy has an equilibrium growth rate of real GDP per capita, (Y/N), equal to
A) n. B) n - d. C) s - n. D) (s - d)/n. E) zero.
Negative marginal utility implies that:
a. ?the price of a good increases as additional units are consumed. b. ?total utility is negative. c. ?total utility decreases as additional units of a good are consumed. d. ?the total revenue spent by a consumer on a good decreases as more of the good is purchased. e. ?marginal utility increases as additional units of a good are consumed.
Suppose the best investment you could make with $200,000 in cash is to purchase a government bond that pays 10 percent interest per year. If you decide to invest the money in your own business instead of buying the government bond, the opportunity cost
of this financial capital is A) $2,000 per year. B) $200,000 per year. C) $20,000 per year. D) zero, because you already had the $200,000.