Neoclassical Growth Theory Is Based on the Assumption of ________

question 5

Multiple Choice

Neoclassical growth theory is based on the assumption of ________ marginal returns to a single factor and ________ returns to scale exhibited by the aggregate production function.

• A)decreasing; constant
• B)decreasing; decreasing
• C)constant; decreasing
• D)increasing; increasing
• E)increasing; constant

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Definitions:

Deadweight Loss

It represents the loss of economic efficiency when the equilibrium for a good or a service is not achieved or is not achievable.

Excise Tax

A tax directly levied on certain goods, services, or activities, such as tobacco, alcohol, or fuel, usually to discourage their use or generate revenue.

Short Run

A period during which at least one input (e.g., plant size, technology) is fixed, and firms can adjust only the variable inputs (e.g., labor).

Excise Tax

A tax imposed on specific goods, services, or activities, often included in the price of items like gasoline, alcohol, and tobacco.