How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?
A) In the economy represented by a straight-line production possibilities curve, there is no opportunity cost.
B) In the economy represented by a straight-line production possibilities curve, neither good is scarce.
C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply.
D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced.
Answer: C
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How are tradable pollution permits used?
a) They are permits bought by firms where prices are set by governments. b) They will be bought by firms that can reduce pollution only at high costs. c) They will be bought by firms that can reduce pollution at low costs. d) They will be used in reducing pollution when corrective taxes cannot be used.
The federal funds rate is the rate at which
a. banks loan money to the Fed b. the Fed loans money to banks c. one regional Federal Reserve bank loans money to another regional Federal Reserve bank d. one bank loans money to another. e. regional Federal Reserve banks loan money to a local bank.