As You Move Down the Production Possibility Frontier, the Absolute

question 179

Multiple Choice

As you move down the production possibility frontier, the absolute value of the marginal rate of transformation

• A) increases.
• B) decreases.
• C) initially increases, then decreases.
• D) initially decreases, then increases.

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Definitions:

Pure Rent

The return to any factor of production that is in fixed supply.

Fixed Supply

A condition where the quantity of a particular good, service, or resource does not change, regardless of the price.

MRP

Marginal Revenue Product, which refers to the additional revenue generated from employing one more unit of a resource.

Perfectly Elastic

A situation in which the demand or supply for a good or service is infinitely responsive to changes in price.