If the Production Possibilities Frontier Between Bottled Water and Water

question 163

Multiple Choice

If the production possibilities frontier between bottled water and water in a jug is a straight line,which of the following statements would be correct?

• A) A large amount of unemployment must exist.
• B) Resources are equally productive at producing either product.
• C) There is no tradeoff between the two goods.
• D) There is no decrease in the production of one good when the production of the other is increased.
• E) Producing more of one good gives the economy a free lunch.

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Definitions:

Exercise Price

The set price at which an option's owner has the right to purchase (for a call option) or sell (for a put option) the underlying asset or commodity.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Delta

In finance, typically refers to the ratio comparing the change in the price of an asset, usually a derivative, to the change in the price of its underlying asset.

Time Value

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