In an Economy Consisting of Only Two Goods,corn and Cloth,the

question 5

Multiple Choice

In an economy consisting of only two goods,corn and cloth,the amount of extra cloth that can be produced efficiently if corn output is reduced by one unit is equal to

• A)the rate of technical substitution for corn divided by the rate of technical substitution for cloth.
• B)the rate of technical substitution for cloth divided by the rate of technical substitution for corn.
• C)the marginal cost of producing cloth divided by the marginal cost of producing corn.
• D)the marginal cost of producing corn divided by the marginal cost of producing cloth.

---

Definitions:

ATC

Average Total Cost; the total cost divided by the quantity produced, representing the cost per unit of output.

AFC

Stands for Average Fixed Cost, which is the fixed costs of production divided by the quantity of output produced.

MC Curve

Marginal cost curve represents how the cost of producing one more unit of a good changes as production scales.

Market Quantity

The total amount of a good or service supplied and purchased in a market at a given price.