Figure 1-7 Shows the Production Possibilities Boundary for an Economy

question 48

Multiple Choice

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas. FIGURE 1-7
-Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose the economy is currently producing at point D.What is the opportunity cost of increasing production of bananas by 100 tonnes?

• A)420 tonnes of cotton
• B)100 tonnes of cotton
• C)there is no opportunity cost
• D)60 tonnes of cotton
• E)920 tonnes of cotton

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Definitions:

Milton Friedman

A prominent economist known for his theories on consumption analysis, monetary history and theory, and the complexity of stabilization policy.

Anna Jacobson Schwartz

An American economist known for her collaborative work with Milton Friedman on the history of monetary policy and banking.

Money Stock

Represents the total quantity of money available in an economy at a specific time, including cash, coins, and balances held in checking and savings accounts.

Economic Activity

The actions that involve the production, distribution, and consumption of goods and services within an economy.