Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:
A. economy A will operate inefficiently.
B. economy B will operate inefficiently.
C. economy A and economy B will grow equally fast.
D. economy B will grow faster than economy A.
Answer: D
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An "omitted variable" is
A) a variable that has no impact on other variables in an economic analysis. B) a variable which is purposely omitted from an economic analysis. C) a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect. D) a variable which is inadvertently omitted from an economic analysis.
The term capital consumption allowance is defined as:
a. the amount of net interest in an economy each year. b. the estimated value of depreciation and obsolescence in investment goods. c. the difference between exports and imports. d. the disposition of disposable personal income. e. the difference between earnings not received and receipts not earned.
The advantage to a corporation of issuing bonds instead of stock is that
A. Bond prices do not fluctuate. B. The possibility of default is lower when bonds are issued. C. The owners do not have to make interest payments on the loan. D. The owners keep control of the company.
The principle of marginal analysis is useful when trying to:
a. find ways to average costs. b. find ways to further income equality. c. make decisions that maximize net gains. d. make either/or decisions.