Why is the production possibilities frontier concave to (bowed away from) the origin?
A) Consumers have declining marginal utility, so their relative satisfaction from consuming a good changes as they move from high levels to low levels of consumption.
B) The shape of the curve is due to the marginal costs of producing the two goods. At high levels of output for a particular good, the marginal cost is very high, and the firm can use the same inputs to produce a relatively large quantity of the other good.
C) For a production possibilities frontier, we no longer assume firms are price takers, and the input prices and output prices change as the firms alter their mix of outputs.
D) none of the above
B
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If the technology for producing a good enables one firm to meet the entire market demand at a lower average total cost than two or more firms could, then that firm has
A) patented the market. B) a natural monopoly. C) increasing average total costs. D) a legal barrier to entry. E) a discriminatory monopoly.
If Toby buys two goods and the prices of both goods increase by 50%
A) the budget constraint will be unchanged. B) the slope of the budget constraint stay the same. C) the slope of the budget constraint will decrease. D) the budget constraint will shift outward in a parallel fashion.