As you move down the production possibility frontier, the absolute value of the marginal rate of transformation
A. increases.
B. initially decreases, then increases.
C. decreases.
D. initially increases, then decreases.
Answer: A
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In real business cycle theory, the persistence of shocks to total factor productivity is justified by
A) the fact that some capital depreciates every period. B) the behavior of Solow residuals. C) the fact that Taylor rules have been used in post-war United States. D) the fact that capital takes some time to build.
If a firm in a perfectly competitive market is producing at a level of output where marginal costs exceed marginal revenue, its profits:
A. must be negative. B. are maximized. C. will increase if it produces less. D. cannot be determined.
If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers, and if as a result, the price to consumers of a pack of cigarettes went up by 40 cents, the:
a. actual burden of this tax falls mostly on consumers. b. actual burden of this tax falls mostly on manufacturers. c. actual burden of the tax would be shared equally by producers and consumers. d. tax would clearly be a progressive tax.
Assume that an individual consumes only coffee and bagels and that the last cup of coffee yields 12 utils and the last bagel 6 utils. If the price of a cup of coffee is $1 and the price of the bagel is $.50, we can conclude that the:
a. consumer should consume more coffee and fewer bagels. b. price of coffee is too high relative to bagels. c. consumer should consume less coffee and more bagels. d. consumer is in equilibrium.