Biology Forums - Study Force

The production possibilities boundary shows possible combinations of guns and butter that can be produced by a country. The lower diagram shows demand and supply for butter.



FIGURE 12-2

Refer to Figure 12-2. Demand and supply for butter are shown by D and S. Suppose the economy is at point (b) on the production possibilities boundary, producing Q1 units of butter. We can say that this economy is ________ efficient because ________.

▸ productively; the marginal cost of production across guns and butter is equated

▸ allocatively; the economy is operating at a point on the production possibilities boundary

▸ productively; the economy is operating at a point inside the production possibilities boundary

▸ allocatively; guns and butter are both produced to the point where the marginal cost to producers equals the marginal value to consumers

▸ allocatively; the price of guns is equal to the price of butter

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