The production possibilities curve illustrates the basic principle that:
A. the production of more of any one good will in time require smaller and smaller sacrifices of
other goods.
B. an economy will automatically obtain full employment of its resources.
C. if all the resources of an economy are in use, more of one good can be produced only if
less of another good is produced.
D. an economy's capacity to produce increases in proportion to its population size.
Answer: C
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If supply decreases and demand increases
A) the market clearing price definitely rises, and the equilibrium quantity falls. B) the market clearing price definitely rises, and the equilibrium quantity is indeterminate. C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.
When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about
a. 1.29, and a decrease in price from $200 to $160 results in an increase in total revenue. b. 1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue. c. 0.78, and a decrease in price from $200 to $160 results in an increase in total revenue. d. 0.78, and a decrease in price from $200 to $160 results in a decrease in total revenue.