In the very long run, theoretically there will be equilibrium if capital and labor are free to migrate. If and when this ever happens, what will the global economy experience?
a. an equality of wages and marginal product
b. an equality of returns to the owners of capital
c. a fully Paretoefficient world economy with the highest standard of living possible
d. an equality of wages and marginal product, an equality of returns to the owners of capital, and a fully Paretoefficient world economy with the highest standard of living possible
Ans: c. a fully Paretoefficient world economy with the highest standard of living possible
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A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when:
a. your marginal utility (or value) derived from eating another serving is zero. b. your total utility (or value) derived from all of the servings consumed just equals $11.95. c. your marginal utility (or value) derived from another serving equals $11.95. d. it is physically impossible for you to eat any more.
For the capital stock to grow, production of capital goods must
a. exceed the inflation rate b. exceed 15 percent of GDP c. exceed the depreciation of existing capital d. increase from the previous year e. exceed the growth of the labor force