The Production Possibilities Frontier Between Two Normal Goods and Services

question 125

Multiple Choice

The production possibilities frontier between two normal goods and services is typically bowed out or concave to the origin because:

• A)society must give up one good to get more of the other.
• B)consumers do not want too much of either good.
• C)government restrictions place limits on the production of certain goods.
• D)consumers want as much of both goods as possible.
• E)the resources used to produce goods and services are not equally suited to the production of both goods.

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Definitions:

Incremental Costs

These are the additional costs incurred when increasing the production volume or taking on a new project.

Incremental Benefits

The additional benefits associated with a particular decision or action, compared to not taking that action.

Variable Production Costs

Costs that fluctuate with the level of output, including expenses like raw materials and direct labor.

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including lease payments, wages, and insurance fees.