If an Economy Is Producing a Level of Output That

question 171

Multiple Choice

If an economy is producing a level of output that is on its production possibilities curve, the economy

• A) has idle resources.
• B) has idle resources but is using resources efficiently.
• C) has no idle resources but is using them inefficiently.
• D) has no idle resources and is using resources efficiently.

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Definitions:

Break-Even Point

The break-even point is the point at which total costs and total revenue are equal, resulting in no net loss or gain, and is used for analyzing the financial viability of a product or service.

Pretax Income

The amount of income earned by a business before the deduction of taxes; it is found by subtracting all expenses, except tax expenses, from revenues.

Variable Cost

Variable cost refers to expenses that vary directly with the level of production output or sales volume, such as materials and labor.

Fixed Cost

Costs that do not change with the level of output produced, such as rent, salaries, and insurance.