Figure 113 Shows Mendork's Production Possibility Curve for the Only Two

question 40

Multiple Choice

Figure 1.13 shows Mendork's production possibility curve for the only two goods that it produces-guns and butter.

-Refer to Figure 1.13 to answer this question. What is the opportunity cost of producing 2 tonnes of butter?

• A) 2 guns.
• B) 18 guns.
• C) 20 guns.
• D) The answer cannot be determined from the information given.

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Definitions:

Sticky Wage Theory

The hypothesis that wages do not adjust quickly to changes in economic conditions, leading to unemployment and other inefficiencies.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often monitored to understand inflation and the cost of living.

Natural Level

Refers to a state that an economic variable tends to trend towards in the long term, unaffected by short-term fluctuations.

Output

In economics, output refers to the total amount of goods and services produced by an economy or a firm in a given period.