If incomes were equal in an economy can you think of any other problems that might exist as a result of this equality?
What will be an ideal response?
First of all the total level of economic activity is likely to be much lower than it otherwise would be. This is because an equality of income will provide little incentive for individual members of the society to try to improve their own lot. A lower level of total economic activity will mean that per capita production will likely be much lower
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Consider an investment with the following payoffs and probabilities: State of the Economy Probability Return Stability .50 1,000 Good Growth .50 2,000 Determine the expected return for this investment
a. 1,300 b. 1,500 c. 1,700 d. 2,000 e. 3,000
The demand for a resource is derived from the consumer demand for the good or service produced by the resource
a. True b. False
The tragedy of the commons is the:
A. undersupply of a public good due to people not wanting to pay for a publicly common good. B. disappearance of certain markets due to the lack of willingness to pay by individuals, leading to collective misfortune. C. depletion of a common resource due to individually rational but collectively inefficient overconsumption. D. notion that common resources are generally under consumed and therefore not produced by suppliers due to artificially low demand.
The expansion of information technology and the increasing complexity of the economy should make the wage premium
a. continue rising. b. continue falling. c. rise. d. fall.