Figure 3-2 Peru's Production Possibilities Frontier

question 67

Multiple Choice

Figure 3-2
Peru's Production Possibilities Frontier

-Refer to Figure 3-2.The fact that the line slopes downward reflects the fact that

• A) for Peru, it is more costly to produce emeralds than it is to produce rubies.
• B) Peru will produce more emeralds and fewer rubies as time goes by.
• C) Peru faces a tradeoff between producing emeralds and producing rubies.
• D) Peru should specialize in producing rubies.

---

Definitions:

Spot Trades

Financial transactions involving the immediate exchange of commodities or securities for cash or another asset.

Trade Settlement

The process of transferring securities from the seller to the buyer and the corresponding payment from the buyer to the seller.

Required Return

The minimum expected return on an investment necessary for an investor to consider making that investment, considering its risk.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling, commonly measured by the Consumer Price Index (CPI).