The opportunity cost of capital is
A) the rate of return realized on an investment.
B) the rate of return that could be earned by the owner's capital were it used elsewhere.
C) the rate used to calculate a firm's tax liability.
D) the rate of interest the government uses to calculate legal business tax penalties.
Answer: B
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Most economists believe that there are positive externalities in education. One can conclude that a free market would fail to give the socially optimal outcome because the equilibrium:
a. price and quantity would be too high. b. price would be too low and quantity would be too high. c. price and quantity would be too low. d. price would be too high and quantity would be too low. e. price and quantity would be just right.
When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is constant
a. True b. False Indicate whether the statement is true or false