Question

Informal activity is naturally restricted in various ways from ever functioning as efficiently as it could were it completely legalized and freed from the restrictions that force the activity into informality. They include:

Select one:

a. informal production and commerce being subject to less risk because it operates outside the law.

b. the lack of formal property rights in the informal sector, due to the fact that productive units do not technically exist and the owners of the property are technically criminals, which means that intertemporal transactions are difficult.

c. the lack of formal property rights, which means informal sector borrowers have to come up with collateral before they can borrow.

d. All of the above.

e. None of the above.

The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.

Select one:

a. marginal revenue

b. total revenue

c. marginal benefit curve

d. opportunity cost

Institutions are:

Select one:

a. government agencies and non-profit organizations.

b. educational organizations, such as universities, colleges, and technical schools.

c. an organization intended to promote a specific type of human behavior.

d. the laws, social norms, traditions, religious beliefs, and other established rules of behavior that provide the incentives to which rational people react.

e. the international laws, social norms, international traditions, religious beliefs, and other established rules of behavior that provide the incentives to which rational people react.

Answer 1

Ans 1: (B) the lack of formal property rights in the informal sector, due to the fact that productive units do not technically exist and the owners of the property are technically criminals, which means that intertemporal transactions are difficult. (If there are no property rights assigned then it can create the problem in the economy).

Ans 2: d. opportunity cost (It is the cost of next best alternative activity forgone).

Ans 3: d. the laws, social norms, traditions, religious beliefs, and other established rules of behavior that provide the incentives to which rational people react.

(This is the proper definition of institution. it is a social structure in which all people cooperate and influences the behavior of people).