Figure: Drums and Shoes

question 39

Multiple Choice

Figure: Drums and Shoes.
Given the graph of the production possibilities frontier in the figure, which of the following statements is TRUE?

• A) The country has 2 units of labor, and it takes 0.5 units of labor to produce 1 unit of either good.
• B) The country has 3 units of labor, and it takes 1 unit of labor to produce 3 drums and 1 unit of labor to produce 3 1/3 pairs of shoes.
• C) The country has 4 units of labor, and it takes 2 units of labor to produce 8 drums and 3 units of labor to produce 3 shoes.
• D) The country has 5 units of labor, and it takes 1 unit of labor to produce 1.8 drums and 1 unit of labor to produce 2.5 shoes.

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Definitions:

Present Value

Present value is a financial concept that calculates the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as an investment for retirement.

Earnings Rate

A measure of the profitability of a company or investment, typically expressed as a percentage.

Net Present Values

A method used in capital budgeting to analyze the profitability of an investment or project by calculating the present values of all cash inflows and outflows.