Refer to the accompanying figure. For the nation whose PPC is shown, it must be true that:
A. the nation's productive resources are better-suited to making milk than to making movies.
B. some of the nation's productive resources are better-suited to making milk, and some are better-suited to making movies.
C. the nation's productive resources are better-suited to making movies than to making milk.
D. the nation has a comparative advantage in making milk.
Answer: B
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If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion, then the economy
A) must be at potential real GDP. B) must be above potential real GDP. C) could be below or above potential real GDP. D) must be below potential real GDP.
Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods. Can Pareto equilibrium be derived?
What will be an ideal response?