The importance of the production possibilities curve is that it shows the different combinations of goods and services that a society can produce: (check all that apply)
a. efficiently.
b. given a fixed amount of resources.
c. given a fixed state of technology.
d. given an unlimited amount of resources.
e. when marginal benefit equals marginal cost.
f. in a fully employed economy.
a. efficiently.
b. given a fixed amount of resources.
c. given a fixed state of technology.
f. in a fully employed economy.
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In the above figure, if the economy is in equilibrium at E1, then
A) the economy is producing below its potential long-run equilibrium at full employment. B) the economy is producing above its potential long-run equilibrium at full employment. C) there is an inflationary gap in the economy. D) the economy is in a period of high inflation.
Which of the following is NOT correct concerning perfectly competitive firms in the long run?
A) Long-run economic profits are zero. B) Price equals minimum long-run average cost. C) Entrepreneurs earn the opportunity cost of their investment. D) The opportunity cost of capital is zero.