The opportunity cost to you of an action is
A. how much you must pay for the opportunity to take the action.
B. the value to you of the next best action you could have taken.
C. the cost to society of giving you the opportunity to take the action.
D. the dollar cost to you of the action.
Answer: B
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According to some New Keynesian theories, one possible rationale for active policy making is
A) growing competition in U.S. product markets. B) flexible prices. C) sluggish adjustment of the price level in response to changes in aggregate demand D) people are not rational and so do not react to incentives.
A motive for FDI includes
A) the extraction of natural resources. B) a multinational corporation attempting to jump over trade restrictions. C) high transportation costs. D) All of the above
A cartel will break down more easily if
A) there are only a few members. B) industry demand is very stable. C) market prices can be observed easily. D) there are many entrants in the industry.
Which of the following propositions would a proponent of supply-side economics be most likely to stress?
a. Higher marginal tax rates will lead to a reduction in the budget deficit and lower interest rates, because they expand government revenues. b. Higher marginal tax rates promote economic inefficiency and thereby retard aggregate output, because they encourage investors to undertake low-productivity projects with substantial tax-shelter benefits. c. Income redistribution payments will exert little impact on real aggregate supply, since they do not consume resources directly. d. A tax reduction will increase the disposable income of households. Thus the primary impact of a tax reduction on aggregate supply will stem from the influence of the tax change on the size of the budget deficit or surplus.