Suppose the Economy Is Producing at a Point on Its

question 79

Multiple Choice

Suppose the economy is producing at a point on its production possibilities curve where the marginal benefit of an additional unit of capital is $45. The marginal cost of an additional unit of capital is $30. In this instance:

• A) the production of capital should decrease.
• B) the production of capital should increase.
• C) the production of capital should not be changed.
• D) the production of capital should be decreased if many people in society are unemployed.

---

Definitions:

IPO Underpricing

The phenomenon where shares of a company are sold at a lower price during the initial public offering than the price at which they subsequently trade in the open market.

Offering Price

The price at which shares of a company are initially made available for purchase during an initial public offering or other issuance.

Firm Commitment

An underwriter's guarantee to the issuer to sell an entire offering of stocks or bonds at a set price.