Suppose the economy is producing at a point on its production possibilities curve where the marginal benefit of an additional unit of capital is $45. The marginal cost of an additional unit of capital is $30. In this instance:

Question

Quizplus · Accepted Answer

The economy should increase the production of capital because the marginal benefit of an additional unit of capital ($45) is greater than the marginal cost of producing it ($30). This means that producing more capital will result in a net gain for the economy. The information about unemployment is irrelevant to the decision about whether or not to increase capital production.

Suppose the Economy Is Producing at a Point on Its