Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
a. the nation is producing beyond its capacity, so inflation will occur.
b. the nation is not using all available resources or is using inferior technology or both.
c. the nation is producing an efficient combination of goods.
d. there will be a large opportunity cost if the nation tries to increase production of any good.
b
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Since the beginning of the millennium, the United States has witnessed closure of many Internet start-up companies. According to the model of perfect competition, these companies must have shut down in the short run because:
a. the price they were charging was too high to attract customers. b. the price they were charging was too low to provide sufficient revenues. c. they were not earning enough revenue to cover their total costs. d. they were not earning enough revenue to cover their total variable costs. e. they were not earning enough revenue to cover their total fixed costs.
When there is a recession (a fall in output) and prices are increasing, and this situation is caused by adverse supply shocks, the term economists use to describe it is:
A. aggregate shifts. B. stagnation. C. inflation. D. stagflation.