The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

question 102

Multiple Choice

The production possibilities boundary shows possible combinations of guns and butter that can be produced by a country.The lower diagram shows demand and supply for butter. FIGURE 12-2
-Refer to Figure 12-2.Suppose this economy is allocatively efficient at Q₁ units of butter.Now suppose there is an increase in demand for butter from D to D₁.After this shift in demand,

• A)the supply curve will shift up to S₁ and allocative efficiency will be maintained.
• B)the marginal value to consumers of butter is less than the marginal cost to producers; the price of butter (relative to the price of guns)rises; the economy moves to output Q₂ of butter and point (c)on the PPB.
• C)the marginal value to consumers of butter is greater than the marginal cost to producers; the price of butter (relative to the price of guns)rises; the economy moves to output Q₂ of butter and point (c)on the PPB.
• D)the increase in the price of butter (relative to the price of guns)will cause the demand curve to shift back down to D and allocative efficiency will be maintained.
• E)the price of guns (relative to the price of butter)rises and the economy moves to point (a)on the PPB.

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Definitions:

Self-managed Work Team

A team in which members collectively take on management responsibilities, such as planning, scheduling, and evaluating their own performance.

Job Enlargement

Increasing the variety of tasks in a job to make it more rewarding and lessen the monotony.

Specialized Tasks

Jobs or activities that require a specific set of skills or knowledge, often focused on a particular area or field.

Equitable Rewards

A system of compensation that is fair and just, taking into consideration factors such as effort, market rates, and individual contribution.