The marginal productivity theory of distribution holds that
A. each factor is paid what it deserves.
B. the owner of each factor is paid the amount that the factor contributes to earnings.
C. each factor’s income depends on how hard it works.
D. each factor receives an equal share of the revenue from production.
Answer: B
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If the absolute value of the tax multiplier equals 1.6, real GDP is $13 trillion, and potential real GDP is $13.4 trillion, then taxes would need to be cut by ________ to restore the economy to potential real GDP
A) $250 billion B) $400 billion C) $640 billion D) None of the above are correct. Taxes should be increased in this case.
Asset trades that deal with debt instruments are best described as
A) share of stock. B) exchange rate. C) receipts. D) factors. E) bonds or bank deposits.
Producers' surplus is the difference between the price
A) sellers receive for a good and the maximum price they would have paid for the good. B) sellers receive for a good and the minimum price for which they could have sold the good. C) buyers pay for a good and the maximum price they would have paid for the good. D) buyers pay for a good and the minimum price for which they would have sold the good.
In what way does monopolistic competition favor consumers?
A) A limited number of sellers differentiate their products or services by offering better quality items and/or greater incentives to purchase them. B) A large number of sellers providing virtually identical products means that no single seller can set the price. C) A large number of sellers and products increases supply of similar, but not identical, products and services, so to increase demand sellers are likely to reduce prices. D) A single seller or provider ensures consistency of product quality and regulated pricing. E) A large number of sellers of virtually identical products means that no single seller can set the price for these products.