-An Economy Produces at Point a on the PPF Shown

question 374

Multiple Choice

-An economy produces at point a on the PPF shown in the above figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat

• A) remains the same.
• B) increases.
• C) is impossible to calculate without numbers on the axes.
• D) decreases.

---

Definitions:

Time Value

The concept that money available in the present is worth more than the same amount in the future due to its potential earning capacity.

Market Value

The ongoing price for buying or selling a service or asset on the open market.

Equilibrium

Equilibrium refers to a state in which market supply and demand balance each other, and as a result, prices become stable.

Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specific price within a specified time frame.