As an Economy Moves Down Along a Straight Line Production

question 136

Multiple Choice

As an economy moves down along a straight line production possibilities frontier,what happens to the opportunity cost of producing the good on the horizontal axis?

• A) It remains constant.
• B) It decreases.
• C) It increases.
• D) Above the midpoint it decreases until it equals 1 at the midpoint and then it increases.
• E) None of these depicts what happens to opportunity cost.

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Definitions:

Economic Rents

The excess payment made to a factor of production over and above what is needed to bring that factor into production, often seen as a measure of market inefficiency.

Aggregate

A total sum or amount made up of distinct components, often used in economics to refer to total output or income.

Equilibrium

An equilibrium where demand meets supply in the marketplace, stabilizing prices as a consequence.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices during a given period.