If the production of capital goods is shown along the horizontal axis of a production possibilities curve, and the production of consumer goods is shown along the vertical axis of a production possibilities curve, and the economy desires to have a rapid rate of economic growth, then the economy should produce at a point
A. at a point near the horizontal axis concentrating on the production of capital goods.
B. near the middle of the curve dividing resources equally between the production of consumer and capital goods.
C. at a point inside the curve allowing the economy to adjust rapidly to changes in economic activity.
D. at a point near the vertical axis concentrating on the production of consumer goods.
Answer: A
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If a budget deficit increases interest rates, it is possible that investment will
A. fall, leading to a larger capital stock. B. fall, so that there is a smaller capital stock. C. rise, because investment is directly related to interest rates. D. rise, because investment is more attractive when interest rates are higher.
Suppose that market demand for a good is Q = 480 - 2p. The marginal cost is MC = 2Q. Calculate the deadweight loss resulting from a monopoly in this market
What will be an ideal response?
The number of firms in a monopolistically competitive market means that
A) all firms will have substantial monopoly power since there are so few firms in the industry. B) each firm has a relatively small share of the total market since there are many firms in the industry. C) the firms will be likely to collude since there are only a few firms in the industry. D) firms will have a hard time earning non-negative profits since there are many firms in the industry.
When economists talk about a barrier to entry, they are referring to
a. a factor that makes it difficult for potential competitors to enter a market. b. the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. c. the downward-sloping portion of the long-run average total cost curve. d. the declining output experienced as additional units of a variable input are used with a given amount of a fixed input.