A Production Possibilities Curve Graphically Represents the Maximum Quantities of Two

question 158

Multiple Choice

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

• A) is using its resources inefficiently.
• B) lacks the necessary technology to produce efficiently.
• C) lacks the resources to produce goods efficiently.
• D) is utilizing its available resources as efficiently as possible.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor expenses.

Variable Cost

Expenses incurred by a business that vary directly with the level of production or sales volume, such as cost of goods sold.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to assess the profitability of investments.

Discount Rate

An interest rate used by central banks to lend money to commercial banks, intended to influence the broader economy.