Use the Following to Answer Question

question 159

Multiple Choice

Use the following to answer question:

-(Figure: Strawberries and Submarines II) Use Figure: Strawberries and Submarines II.The downward slope of the production possibility frontier implies that resources:

• A)must be used efficiently.
• B)are scarce.
• C)should not be wasted.
• D)should be allocated so that approximately equal amounts of both goods are produced.

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Definitions:

X-inefficiency

X-inefficiency occurs when a firm lacks the incentive to control costs, leading to inefficiency and higher expenditure than is necessary for the level of output produced.

Economies of Scale

Economies of scale refer to the cost advantage achieved by an increase in production, which typically leads to a reduction in average cost per unit as scale increases.

Average Total Costs

Average total costs represent the total costs of production (fixed and variable costs combined) divided by the quantity of output produced.

Pure Nondiscriminating Monopolist

A market situation where a single seller sells a product to all buyers at the same price without price discrimination.