What is the key proposition of new growth theory that makes economic growth persist?
What will be an ideal response?
The key proposition that makes growth persist indefinitely in the new growth theory is the assumption that the returns to knowledge and human capital do not diminish. As a result, increases in knowledge do not cause diminishing returns and the incentive to innovate remains high. As people accumulate more knowledge, the incentive to innovate does not fall and so people continue to innovate new and better ways to produce new and better products. This innovation means that economic growth persists indefinitely.
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A major problem with using a tradable emission allowances system to control pollution is
A) that it grants firms a license to pollute. B) the difficulty in determining the emissions target. C) it discourages firms from implementing cost-effective pollution control technology. D) that it does not eliminate pollution completely.
In order to maximize its profits, a firm that hires workers in a perfectly competitive labor market will hire workers until the:
A. extra revenue generated from hiring another worker equals the extra cost of hiring that worker. B. the marginal wage rate equals marginal product of the last worker. C. extra revenue generated from hiring another worker equals the extra profit from hiring that worker. D. the marginal product of labor begins to decline.