If an Economy Is Operating Inside Its Production Possibilities Curve

question 129

Multiple Choice

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it

• A) can only produce more consumer goods by producing fewer capital goods.
• B) can only produce more capital goods by producing fewer consumer goods.
• C) can produce more of both consumer goods and capital goods by using resources that are currently idle.
• D) must improve its technology to produce more output.

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Definitions:

Perfectly Competitive Firm

A company that operates in a market where there are many buyers and sellers, none of which can influence the market price.

Long-Run Equilibrium

A state where all factors of production in an economy are fully adjusted to market conditions, leading to stable prices and full employment of resources.

Profit Maximization

The method a company uses to decide the price and production amount that yields the highest profit.

Economic Profits

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, representing the excess earnings over the next best alternative.