Use the Following to Answer Questions

question 37

Multiple Choice

Use the following to answer questions :
Figure: Production Possibility Frontier
-(Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier. If the economy is producing 8 cars and 12 computers per period:

• A)unemployment or inefficiency will ensue.
• B)the notion of increasing opportunity cost is invalidated.
• C)the economy is still efficient but has made a decision not to buy as much as it could.
• D)something must be done to reduce the amount of employment.

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Definitions:

Profit-Maximizing Price

The price level at which a company can sell its product to maximize its profit, calculated by understanding demand and cost structures.

Lerner Index

A measure of a firm's market power, calculated as the difference between price and marginal cost relative to price.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, perfect information, and no barriers to entry or exit.

Multiplant Firm

A company that operates in more than one location, often to take advantage of different regional resources or markets.