Suppose the Economy Goes from a Point on Its Production

question 57

Multiple Choice

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point below that PPF.Assuming that the PPF has not shifted,this could be due to

• A)a gain of resources.
• B)a loss of resources.
• C)technological improvement in the production of both goods.
• D)a new law that interferes with economic efficiency.

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Definitions:

Financial Break-even Point

The level of earnings before interest and taxes (EBIT) where the company's total revenues equals its total expenses.

Real Option

A financial concept representing the choice a company has to undertake certain business decisions, like investment opportunities, waiting for more information before committing.

Option to Wait

The strategic choice to delay a decision or an investment to gather more information or wait for a more favorable market condition.

Option to Abandon

A business decision making tool that allows a company to cease an investment or project if it turns out to be financially nonviable, minimizing losses.