The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

question 78

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 this economy is allocatively efficient at Q1 units of butter. Now suppose there is an increase in demand for butter from D to D1. After this shift in demand,

• A) the supply curve will shift up to S1 and allocative efficiency will be maintained.
• B) the marginal value to consumers of butter is less than the marginal cost to producers; the price of butter relative to the price of guns) rises; the economy moves to output Q 2 of butter and point c) on the PPB.
• C) the marginal value to consumers of butter is greater than the marginal cost to producers; the price of butter relative to the price of guns) rises; the economy moves to output Q2 of butter and point c) on the PPB.
• D) the increase in the price of butter relative to the price of guns) will cause the demand curve to shift back down to D and allocative efficiency will be maintained.
• E) the price of guns relative to the price of butter) rises and the economy moves to point a) on the PPB.

Understand the concept and characteristics of random variables.

Identify the differences between continuous and discrete random variables.

Calculate probabilities using probability distributions.

Distinguish between mutually exclusive and non-exclusive events.

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Definitions:

Reactance

A motivational reaction to restrictions on personal freedom, manifesting in an urge to regain that freedom.

Accomplice Behavior

The actions taken by an individual who helps another to commit a crime or wrongful act.

Experimental Realism

The extent to which the conditions of an experiment mimic the real-world scenarios they aim to replicate or study, affecting the validity of the outcomes.

Reactance

A motivational reaction to offers, persons, rules, or regulations that threaten or eliminate specific behavioral freedoms.