This topic contains a solution. Click here to go to the answer

Author Question: Which of the following describes the reason why scarcity exists? A. Governments make bad economic ... (Read 131 times)

123654777

  • Hero Member
  • *****
  • Posts: 585
Which of the following describes the reason why scarcity exists?
 
  A. Governments make bad economic decisions.
  B. The gap between the rich and the poor is too wide.
  C. Wants exceed the resources available to satisfy them.
  D. There is too much unemployment.

Question 2

Boyd Manufacturing operates in a perfectly competitive market. The firm recently purchased a new structure with an expected rate of return of 18 percent.
 
  If the market rate of interest is 10 percent, was the firm's decision to purchase the structure a wise one? Explain.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

mistyjohnson

  • Sr. Member
  • ****
  • Posts: 331
Answer to Question 1

C Answer C uses the definition of scarcity on page 2.

Answer to Question 2

Yes. A perfectly competitive firm should keep investing in capital up to the point where the expected rate of return is equal to the interest rate. In this case, the expected rate of return on the investment is higher than the market rate of interest. This implies that the opportunity cost of the funds used to purchase the structure is lower than the expected revenues from the structure. Thus, it was a good decision.





 

Did you know?

Pink eye is a term that refers to conjunctivitis, which is inflammation of the thin, clear membrane (conjunctiva) over the white part of the eye (sclera). It may be triggered by a virus, bacteria, or foreign body in the eye. Antibiotic eye drops alleviate bacterial conjunctivitis, and antihistamine allergy pills or eye drops help control allergic conjunctivitis symptoms.

Did you know?

Cucumber slices relieve headaches by tightening blood vessels, reducing blood flow to the area, and relieving pressure.

Did you know?

Amphetamine poisoning can cause intravascular coagulation, circulatory collapse, rhabdomyolysis, ischemic colitis, acute psychosis, hyperthermia, respiratory distress syndrome, and pericarditis.

Did you know?

Human neurons are so small that they require a microscope in order to be seen. However, some neurons can be up to 3 feet long, such as those that extend from the spinal cord to the toes.

Did you know?

The horizontal fraction bar was introduced by the Arabs.

For a complete list of videos, visit our video library