Suppose That a Nation Can Only Make Two Products: Defense

question 126

Multiple Choice

Suppose that a nation can only make two products: defense goods and civilian goods. In a graph of the marginal benefit (MB) and marginal cost (MC) of defense goods, a leftward shift of the MB curve will cause the optimal quantity of:

• A) Civilian goods to decrease
• B) Both civilian goods and defense goods to decrease
• C) Defense goods to decrease
• D) Defense goods to increase