When an Economy Is Operating Efficiently, Which Is True

question 80

Multiple Choice

When an economy is operating efficiently, which is true?

• A) All resources are fully employed.
• B) It would be possible to increase the output of 1 good without decreasing the output of the other.
• C) Resources are not fully employed or current technology is not being fully utilized.
• D) This economy is operating to the right of its production possibilities curve (PPC).

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Definitions:

Payback Method

An investment appraisal technique that calculates the time needed for an investment to generate cash flows sufficient to recover the initial cost.

Weighted Average Cost of Capital (WACC)

A calculation of a company's cost of capital in which each category of capital (debt, equity) is proportionally weighted.

Internal Rate of Return (IRR)

IRR is a financial metric used to estimate the profitability of investments, calculated as the rate of return that sets the net present value of all cash flows from a particular project to zero.

Payback Period

The duration required for an investment to recover its initial outlay, calculated by dividing the initial investment by the annual cash inflows.