Critics of the huge net returns on, for example, oil production will claim that the returns are
A. interest on the capital investment.
B. rents on a natural resource.
C. profits on entrepreneurial activity.
D. exorbitant and should be taxed away.
Answer: B
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If companies decrease investment spending because of lower expected returns on projects, forecasters should anticipate (everything else the same) that
A) GDP will rise. B) the money supply will fall. C) interest rates will fall. D) saving will increase.
Consider a world of two countries facing opportunity costs and producing only wheat and cloth. In one hour, residents of Country A can produce a maximum of either 1 unit of wheat or 0.5 unit of cloth,
whereas residents of Country B can produce a maximum of either 0.3 unit of wheat or 0.4 unit of cloth. Country B should export A) wheat and cloth; country A should not export anything. B) wheat and country A should export cloth. C) nothing and country A should export both wheat and cloth. D) cloth and country A should export wheat.