The most efficient way to encourage the growth of an infant ...

[go.lag]

The most efficient way to encourage the growth of an infant industry is through
 
  A) a voluntary export restraint.
  B) a tariff.
  C) a subsidy.
  D) an import quota.

Question 2

Define the aggregate production function. Discuss why the aggregate production function exhibits diminishing returns.
 
  What will be an ideal response?

[Shshxj]

Answer to Question 1

C

Answer to Question 2

The aggregate production function is the relationship that shows the maximum quantity of real GDP that can be produced as the quantity of labor employed changes and all other influences on aggregate production remain the same. The aggregate production function exhibits diminishing returns because the quantity of capital (and other resources) is fixed. As more labor is hired, the extra output produced decreases because the extra workers have less capital with which to work. As a result, the additional workers cannot produce as much additional output as did the previously hired workers.

[go.lag]

Gracias!

[Dominic]

TYSM