The investment trade-off:
A. defines the opportunity cost of capital investment.
B. is why countries don't devote all their resources to capital investment.
C. is a reduction in current consumption to pay for the investment in capital intended to increase future production.
D. All of these are true.
Answer: D
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The process of focusing on only the most important factors to explain a phenomenon is called
A. abstraction. B. marginal analysis. C. rational choice. D. controlled experimentation. E. the trade-off between efficiency and equality.
Cooperation:
B. is sustained by the promise of punishment for good behavior. C. can be established even if threats/promises are not credible. D. All of these are true about cooperation.
If a firm is a price taker, then it can
a. sell below the market price and increase its economic profit b. sell all it wants at the market price c. sell above the market price and increase its economic profit d. supply the entire market e. choose its own price
Don's Taxicab Service is the only taxi company operating in a large city. In the beginning, Don took over the local taxi market by buying out his competition. Now he sets his own rates as a privately-owned monopoly, but residents and tourists are upset by the very high prices. If there are no economies of scale in taxicab service, then the best solution is most likely
a. to encourage concentration by constructing barriers to entry b. laissez-faire since the market is clearly contestable c. antitrust action to break up Don's into a number of firms d. price regulation by a city commission e. for the city to take over and operate Don's Taxicab