-The Above Figure Shows the Production Possibility Frontier for a Country.Suppose

question 20

Multiple Choice

-The above figure shows the production possibility frontier for a country.Suppose the country is producing at point A.What is the opportunity cost of increasing the production of rice to 12 tons?

• A) 15 thousand bottles of wine
• B) 6 thousand bottles of wine
• C) 9 thousand bottles of wine
• D) 12 tons of rice
• E) Nothing, it is a free lunch.

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Definitions:

Fixed Costs

are business expenses that remain the same regardless of the level of output or sales, such as rent, salaries, and loan payments.

Variable Costs

Costs that vary directly with the level of production output, including expenses like labor and material costs.

Operating Leverage

A financial ratio that measures the degree to which a company can increase operating income by increasing revenue, highlighting the impact of fixed costs.

High Debt

A situation where a company or individual carries a large amount of debt relative to their assets or equity.