What causes capital and labor shares of gross domestic product to remain consistent over the years?
What will be an ideal response?
Economic forces keep the labor and capital shares of income almost perfectly constant. Here is an example of how these forces work. Suppose that capital started to become scarce relative to the amount of labor and the capital share of income consequently began to decline. The growing scarcity of capital would cause capital's value to grow, leading to higher payments to each unit of capital and greater subsequent investment in capital. Both of these mechanisms would offset the decline in the capital share of income. Forces like this prevent the capital and labor shares of income from moving around very much.
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The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 2 to 3 units?
A) $18 B) $4 C) $7 D) $6
Regulating an industry to remove all economic profit
a. removes all incentive for efficiency and responsiveness to consumer demand. b. removes distortions caused by cross subsidies. c. removes allocative inefficiency. d. increases incentives to be productively efficient.