The opportunity cost of capital is:
a. the cost of labor inputs required to operate that capital.
b. the cost of raw materials necessary to put that capital to work.
c. the payment necessary to keep that capital from moving to an alternative use.
d. the costs of maintenance necessary to keep that capital operating.
e. the cost of hiring more units of capital to generate additional units of output.
c
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Using the HO model, assume that the United States is capital abundant and Mexico is labor abundant. If soybeans are capital intensive and avocados are labor intensive,
A) Mexico will produce more soybeans once trade is introduced. B) the United States will produce more avocados once trade is introduced. C) avocado prices in the United States will fall once trade begins. D) soybean prices in Mexico will rise once trade begins.
Crowding out occurs when
a. increased taxes force higher levels of national saving. b. deficit spending by the government forces private investment spending to contract. c. local businesses cannot get government contracts because of the higher bids of large corporations. d. foreign investors are willing to pay higher prices for U.S. bonds than American citizens will pay.