Explain the difference between consumption and capital goods
What will be an ideal response?
A difference lies in the identity of the purchaser. Consumption goods (and services) are purchased by households and investment goods are purchased by firms. Households buy consumption goods to use for personal enjoyment. They contribute to the person's standard of living. Firms buy capital goods to use as a factor of production. Capital goods are used along with the other factors of production, to help produce additional goods and services.
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Consider a market in which there is an external cost. A tax can be used to arrive at the efficient market equilibrium because the tax will
A) decrease supply of the good. B) increase supply of the good. C) decrease demand for the good. D) increase demand for the good.
Suppose a person defects from Cuba (a country that generally disregards the use of markets) to the United States and asks to see a market in action. Where would you take her? Did you give her a complete showing of this market?