Suppose that Venezuela produces beef and oil and it can switch production between each at a constant rate. If the most beef it can produce is 300 million pounds and the most oil it can produce is 50 million barrels, then what is the opportunity cost of a pound of beef and what is the opportunity cost of a barrel of oil?
The opportunity cost of a pound of beef is 50 barrels of oil/300 = 1/6 barrels of oil.
The opportunity cost of a barrel of oil is 300 pounds of beef/50 = 6 pounds of beef.
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The sub-discipline of economics that focuses especially on individual markets is:
a. normative economics. b. positive economics. c. microeconomics. d. macroeconomics. e. econometrics.
Which of the following is a statement of positive economics?
a. The income tax reduces after-tax incomes of the rich b. A reduction in tax rates makes the after-tax distribution of income fairer. c. Tax rates ought to be reduced so that people will work more. d. All of the above are statements of positive economics.
An externality is defined as
a. an opportunity cost that is not considered, which causes inefficiency. b. a social cost that affects parties external to a transaction. c. a transaction which imposes a loss on one of the parties involved. d. a "cost of doing business" that cannot be allocated to any particular good. e. the increase in cost associated with increased production.
The paradox of thrift suggests that when households intend to save more, they will ________ consumption, which will ultimately lead to ____________ aggregate saving.
a) decrease; lower b) decrease; higher c) increase; lower d) increase; higher