The Diagram Below Shows Two Production Possibilities Boundaries for Country

question 1

Multiple Choice

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4
-Refer to Figure 1-4.The production possibilities boundaries are drawn concave to the origin.What does this shape of the PPB demonstrate?

• A)the decreasing opportunity cost of producing more of either good
• B)the scarcity of resources in the economy
• C)the constant opportunity cost of producing more of either good
• D)the unfair distribution of resources in the economy
• E)the increasing opportunity cost of producing more of either good

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Definitions:

Total Variable

Expenses that change in proportion to the activity of a business, such as costs of goods sold, which vary with the level of production or sales volume.

Average Variable Cost

The variable costs of production (costs that change with output level) divided by the quantity of output, indicating the average variable cost per unit.

Producing Purses

Producing purses involves the manufacturing and assembling of various materials to create handbags and similar accessories.

Average Fixed Cost

The sum of all production fixed costs divided by the number of units produced.