The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

question 92

Multiple Choice

The production possibilities boundary shows possible combinations of guns and butter that can be produced by a country.The lower diagram shows demand and supply for butter. FIGURE 12-2
-Refer to Figure 12-2.Suppose demand and supply for butter are shown by D and S,respectively.And suppose the economy is at point (a) on the production possibilities boundary.Is this output of guns and butter allocatively efficient?

• A)No,because the marginal value to consumers of the butter produced is greater than the marginal cost to producers.
• B)No,because the marginal cost to producers of the butter produced is more than the marginal value to consumers.
• C)Yes,because all points on the production possibilities boundary are allocatively efficient.
• D)Yes,because the marginal cost of producing the butter equals the marginal value of consuming the butter.
• E)No,because the marginal costs for guns and butter are not equated.

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Definitions:

Groupthink

A psychological phenomenon where the desire for harmony or conformity in a group leads to an irrational or dysfunctional decision-making outcome.

Designated Leader

An individual who has been officially chosen or appointed to guide or direct a group, team, or organization.

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A social psychological phenomenon where individuals are less likely to offer help to a person in need when other people are present.

Ambiguous

Something that is open to more than one interpretation, explanation, or meaning and is not explicitly defined or clear.