The concavity or bowed-out shape of the production possibilities frontier is the result of
A. the law of downward-sloping demand.
B. the law of upward-sloping demand.
C. the principle of increasing cost.
D. complementarity in consumption.
Answer: C
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Using the liquidity preference framework, show what happens to interest rates during a business cycle recession
What will be an ideal response?
If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:
A. inelastic. B. elastic. C. unit elastic. D. perfectly inelastic.
The direct effect of an increase in the money supply is to
A. decrease aggregate demand as people anticipate future economic problems. B. increase interest rates as people anticipate higher inflation in the future. C. increase aggregate demand as people try to spend their excess money balances. D. raise interest rates as people increase their saving.
Suppose you are trying to understand the effect that an increase in the price of grapes will have on the market for wine. An effective model to determine this effect is one that evaluates the change in the price of grapes on the market quantity of wine assuming:
a) buyers' incomes also change. b) buyers' preferences and incomes also change. c) some wines use different grapes. d) no other change takes place.