Use the Following to Answer Question

question 256

Multiple Choice

Use the following to answer question:

-(Figure: Production Possibilities and Circular-Flow Diagram) Use Figure: Production Possibilities and Circular-Flow Diagram.Assume the two figures represent the same economy.Suppose that in the circular-flow diagram capital that used to flow to firms producing coconuts now flows to firms producing fish.This adjustment in the economy would be BEST represented in the production possibilities figure by a move from point A toward:

• A)point A (no movement).
• B)point B (a decrease in coconut production and an increase in fish production).
• C)point C (a decrease in coconut production).
• D)point D (an outward shift of the entire curve).

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Definitions:

Debt Ratio

Debt divided by total assets. A financial ratio measuring the degree to which the firm uses borrowed money.

Total Debt

The sum of all liabilities, both current and long-term, that a company owes to external parties.

Net Worth

The total assets minus total liabilities of an individual or company, indicating financial health and stability.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit a company makes after paying for variable costs of production but before paying interest or tax.