If the Production Possibilities Frontier Between Bottled Water and Water

question 71

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)There is no tradeoff between the two goods.
• B)Resources are equally productive at producing either product.
• C)A large amount of unemployment must exist.
• 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:

Contribution Margin

The amount by which the sale of a product or service exceeds its variable costs, used to cover fixed costs and generate profit.

Incremental Annual Net Cash Inflows

The additional cash flow a company receives from undertaking a project, after accounting for direct costs and revenue changes.

Donut Maker

A kitchen appliance used specifically for making donuts.

Simple Rate

A basic, uncomplicated rate often used in calculations that do not require detailed financial complexity.