Exhibit 2-3

question 154

Multiple Choice

Exhibit 2-3
-Point g in Exhibit 2-3 is efficient because

• A)the only way to increase production of A is by decreasing production of B
• B)the economy can increase production of both A and B from point b
• C)it is impossible to move to any other point along the production possibilities frontier
• D)it is impossible to move to any other point inside the production possibilities frontier
• E)no other production possibilities frontier exists

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost to produce one additional unit of a good changes as the production volume is increased.

Average Variable Cost Curve

A graph that displays how the variable cost per unit changes with changes in output level.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one more unit of a good varies as the production level increases.

Average Total Cost

The total cost of production divided by the quantity of output produced; it combines all fixed and variable costs per unit of output.