Explain how each of the following could discourage economic growth:
a. The government closes all of the schools so that more people will be available for work.
b. The country fears military invasion and spends half of its income on military goods.
Economic growth depends on a country's willingness to sacrifice current consumption and invest in physical and/or human capital goods. Expanding the country's capital stock or improving the quality of its labor force allows it to produce more goods and services. Closing all of the schools will mean sacrificing investment in human capital in favor of current consumption. Likewise, choosing to spend half of available income on military goods will leave fewer resources for investment in nonmilitary physical or human capital.
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Refer to the figure above. If the optimal number of machines rented is 100, the market rental price must be:
A) $3 per month. B) $4 per month. C) $5 per month. D) $7 per month.
The marginal product and average product curves
A) never intersect. B) intersect at the maximum point of the marginal product curve. C) intersect at the maximum point of the average product curve. D) do not intersect at any predictable point.
Private insurance companies have been out of the flood insurance business for decades. After their departure the government has gone into the business by granting coverage with below-market premiums
Why might this be in inefficient outcome? Comment on the amount of housing that we should expect to see along our nation's coastlines. Also, discuss the degree of danger that this poses for both property and lives when hurricanes strike.
Although U.S. Steel controlled nearly 75 percent of the domestic iron and steel industry, in 1920 the Supreme Court ruled that the firm was not in violation of the Sherman Antitrust Act because there was no evidence of abusive behavior. What antitrust doctrine was the court applying in this case?
a. The rule of reason. b. The per se rule. c. The marginal cost pricing rule. d. The natural monopoly rule.