Given Its Production Possibilities Curve, the Optimal Combination of Outputs

question 110

Multiple Choice

Given its production possibilities curve, the optimal combination of outputs for a society:

• A)​is beyond the production possibilities curve.
• B)​is at the midpoint of the production possibilities curve.
• C)​is inside the production possibilities curve.
• D)​depends on the preferences of that society.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, offering predictability in budgeting.

Operating Leverage

A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.

Highly Automated Industries

Sectors that rely extensively on automation and machinery to produce goods or deliver services with minimal human intervention.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how revenue growth translates into growth in operating income.