If an Economy Is Operating at a Point Inside the Production

question 58

Multiple Choice

If an economy is operating at a point inside the production possibilities frontier, then:

• A) some of the economy's resources are unemployed.
• B) the production decisions are made by the government.
• C) unlimited resources must satisfy scarce desires.
• D) using the existing resources efficiently will shift the production possibilities frontier outward.
• E) society is paying too many wages.

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Definitions:

Total Surplus

The total net gain to consumers and producers from trading in a market; the sum of the producer surplus and the consumer surplus.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Free Trade

An economic policy that allows goods and services to be traded between countries with few or no barriers such as tariffs or quotas.

Autarky

An economic system of self-sufficiency where a country or region attempts to produce everything it needs without engaging in international trade.