Suppose Colin Brews Beer and Makes Cheese

question 122

Multiple Choice

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

• A)inefficient point.
• B)efficient point.
• C)unattainable point.
• D)ideal point.

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Definitions:

Absolute Advantage

The ability of a country, individual, or firm to produce a good more efficiently than another entity using the same amount of resources.

Comparative Advantage

An economic theory that suggests that countries or entities gain and benefit from trading if they specialize in producing goods for which they have a lower opportunity cost.

Trade

The act of buying, selling, or exchanging goods and services between people or entities, within or across borders.

Willingness-To-Pay

The maximum amount that a consumer is prepared to pay for a good or service.