Suppose a Nation Is Currently Producing at a Point Inside

question 187

Multiple Choice

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

• A)the nation is producing beyond its capacity, so inflation will occur.
• B)the nation is not using all available resources or is using inferior technology or both.
• C)the nation is producing an efficient combination of goods.
• D)there will be a large opportunity cost if the nation tries to increase production of any good.

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Definitions:

Charitable Contribution

Monetary or in-kind donations given to charitable organizations, often eligible for tax deductions.

Sunk Cost

Expenses that were previously incurred and cannot be reclaimed.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, essentially what is sacrificed when a particular choice is made.

Differential Cost

The variation in overall expenses incurred from choosing one option instead of another.