If incomes were equal in an economy can you think of any other problems that might exist as a result of this equality?
What will be an ideal response?
First of all the total level of economic activity is likely to be much lower than it otherwise would be. This is because an equality of income will provide little incentive for individual members of the society to try to improve their own lot. A lower level of total economic activity will mean that per capita production will likely be much lower
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Suppose a firm has an output of 10,000 cans and a total fixed cost of $2,000 . At an output of 5,000 the difference between the total cost and the total variable cost is:
a. b and c. b. $0.40. c. the average fixed cost. d. $2,000. e. $0.20.
An increase in spending of $25 billion increases real GDP from $600 billion to $700 billion. The marginal propensity to consume must be:
A. 0.25 and the multiplier is 4 B. 0.50 and the multiplier is 2 C. 0.75 and the multiplier is 4 D. 0.80 and the multiplier is 5