When Society Produces the Combination of Goods and Services on the PPF

question 200

Multiple Choice

When society produces the combination of goods and services on the PPF that it values the most highly,society has

• A) achieved only production efficiency and definitely not allocative efficiency.
• B) achieved only allocative efficiency definitely not production efficiency.
• C) achieved both production efficiency and allocative efficiency.
• D) achieved a free lunch.
• E) perhaps achieved production efficiency and has perhaps achieved allocative efficiency.

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Definitions:

Inflation

An increase in the general price level of goods and services in an economy over a period of time.

Cost-Push Inflation

Inflation resulting from a rise in the cost of inputs such as labor, raw materials, and so forth, which subsequently reduces the availability of these goods.

Aggregate Demand Curve

A graphical representation showing the total demand for all goods and services in an economy at different price levels.

Aggregate Supply Curve

A graphical representation that shows the total quantity of goods and services producers are willing to supply at different price levels in an economy.