Suppose the Production Possibilities Frontier (PPF) of an Economy Has

question 185

Multiple Choice

Suppose the production possibilities frontier (PPF) of an economy has been plotted on a graph. If the horizontal axis of the graph measures the output of capital goods and the vertical axis measures the output of consumer goods, then a point outside the PPF represents _____

• A) a smaller quantity of consumer goods than that represented by a point inside the PPF.
• B) an inefficient output combination of the two goods in the economy.
• C) an unattainable output combination of the two goods in the economy.
• D) an output combination of more consumer goods than capital goods.
• E) a smaller quantity of capital goods than that represented by a point inside the PPF.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied that equals the quantity demanded at the market equilibrium price.

Positively Sloped

A line or curve on a graph that increases in value as it moves from left to right, indicating a direct relationship between two variables.

Negatively Sloped

A descriptor for a line on a graph that moves downwards from left to right, indicating an inverse relationship between the variables plotted.

Total Surplus

The total net gain to society from creating and consuming goods and services, encapsulated by the combination of consumer and producer surplus.