Many Economists Argue That Real GDP Is Not a Good

question 153

Multiple Choice

Many economists argue that real GDP is not a good measure of economic well-being because

• A) it overvalues the increases in nonmarket transactions.
• B) it excludes Social Security payments made to retirees.
• C) it includes the taxes we pay to the federal government.
• D) it excludes the environmental quality of life.

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Definitions:

Increasing-Cost Industry

An industry in which the costs of production increase as more firms enter the market, typically due to limitations in resources.

Decreasing-Cost Industry

An industry in which the average cost of production decreases as the industry grows and output increases.

Decreasing Returns to Scale

A situation in which a proportional increase in all inputs leads to a less than proportional increase in output, indicating reduced efficiency as scale of production expands.

Long-Run Equilibrium

A state in which all factors of production and inputs can be adjusted by firms, leading to a situation where no firm has an incentive to change its output or production method.