Question

According to Douglass North:

Select one:

a. institutions do not matter for economic growth.

b. institutions that lower transaction costs are the fundamental causes of economic growth.

c. the excessive concern over transactions costs hides the true determinants of economic growth, which are institutions.

d. the costs of carrying out mutually-beneficial transactions will rise as economies become more developed, and this is why growth will eventually slow down.

Which of the following is not an effective method of reducing negative externalities?

Select one:

a. relying on voluntary compliance

b. taxing the output of industries that pollute

c. creating legal environmental standards

d. increasing public spending on cleanup and reduction of pollution

Increasing marginal opportunity cost (i.e., increasing opportunity costs) implies that:

Select one:

a. the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

b. the more resources already devoted to any activity, the benefits from allocating yet more resources to that activity decreases by progressively larger amounts.

c. that rising opportunity costs makes it inefficient to produce beyond a certain quantity.

d. the law of scarcity.

Answer 1

1) institutions that lower transaction costs are the fundamental causes of Economic growth

( Douglas North was the first to highlight the role of institutions in economic growth. He even classified institutions into broad categories and explained their functions.)

2) Relying on voluntary compliance.

( In today's globalised, driven by profit world, relying on public choice or voluntarily compliance is never an effective method of reducing pollution.)

3) The more resources allocated to an activity, benefit from allocating yet more resources to that activity decreases progressively by larger amounts.

( This happens as a result of transfer resources and the increasing opportunity costs associated with it)