If an Economy Is Operating at a Point Inside the Production

question 123

Multiple Choice

If an economy is operating at a point inside the production possibilities curve, then

• A) society's resources are being inefficiently utilized.
• B) the curve will move to the left.
• C) society's resources are being used to produce too many consumer goods.
• D) economic policy must implemented to slow growth of the economy further.

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Definitions:

Diseconomies of Scale

The phenomenon where, as a firm expands, its costs start increasing per unit of output, usually due to inefficiencies and management challenges that arise with size.

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may decrease.

Natural Monopoly

A market structure where a single provider is more efficient in supplying the entire market with a product or service, due to high fixed or startup costs.