Why Would a Production Possibilities Frontier Be Bowed Out

question 126

Multiple Choice

Why would a production possibilities frontier be bowed out?  

• A) Resources are used efficiently. 
• B) Production of one good involves an opportunity cost. 
• C) Resources are NOT perfectly adaptable to making each good. 
• D) Technology is improving.

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Definitions:

Real Interest Rate

The interest rate adjusted for inflation, providing a more accurate measure of the cost of borrowing and the real yield to investors.

Wage-Price Spiral

A situation where rising wages increase disposable income, leading to higher demand for goods and services, which then leads to higher prices and further wage demands.

Higher Wages

Increased salaries or hourly rates paid to employees.

Real Interest Rates

The interest rate adjusted for inflation, reflecting the real cost of borrowing and the real yield to lenders or investors.