The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

question 32

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. How can this economy move toward allocative efficiency?

• A) produce more butter, less guns.
• B) increase the demand for butter.
• C) produce less butter, more guns.
• D) expand the production possibilities boundary outward.
• E) increase the supply of guns.

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Definitions:

Clayton Act

A U.S. antitrust law enacted in 1914 to prevent anti-competitive practices and monopolies, supplementing the Sherman Antitrust Act.

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