The law of increasing opportunity cost reflects the fact that
a. the production possibilities frontier is bowed inward
b. resources are not perfectly substitutable
c. resources cannot always be used efficiently
d. an economy will operate at a point inside the production possibilities frontier
e. an economy will operate at a point along the production possibilities frontier
B
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Which of the following is most likely to be an example of causation?
A) A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future. B) A soccer player scores 4 goals when he wears red socks. He concludes that the red socks helped him score the goals. C) A firm producing CFLs installs new machinery. The per-day production of CFLs increases. D) The crime rate is high in a country. The literacy rate is high as well.
If a marginal cost pricing rule is imposed on the firm in the figure above, the total surplus will be
A) zero. B) $800. C) $400. D) $200.
Microeconomic models are used to
A) make predictions. B) explain real-life phenomena. C) evaluate policy alternatives. D) All of the above.