Which of the following is NOT a correct description of opportunity cost of capital?
A) It is the normal rate of return on investment.
B) It is normally included in accounting costs.
C) It is the income sacrificed by not investing in another firm.
D) It is an implicit cost.
B
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Suppose that inflation is at the target rate and output has fallen substantially below potential output. A central bank with a primary objective of price stability should ________
A) do nothing, because inflation cannot rise when unemployment is high B) ease monetary policy, to avoid a decrease in the inflation rate C) do nothing, because stabilizing economic activity is not a primary objective D) ease monetary policy, because avoiding high unemployment is more important than avoiding high inflation E) none of the above
If a person who generates a negative externality incorporates into his or her private cost-benefit calculations the effects that this externality will have on third parties, the externality has been
A. substituted. B. accommodated. C. compounded. D. internalized.