The Production Possibilities Boundary Shows Possible Combinations of Guns and Butter

Multiple Choice

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.Suppose demand and supply for butter are shown by D and S,respectively.And suppose the economy is at point (b) on the production possibilities boundary,producing units of butter.We can say that this economy is ________ efficient because ________.

A) allocatively; guns and butter are both produced to the point where the marginal cost to producers equals the marginal value to consumers
B) productively; the marginal cost of production across guns and butter is equated
C) allocatively; the price of guns is equal to the price of butter
D) productively; the economy is operating at a point inside the production possibilities boundary
E) allocatively; the economy is operating at a point on the production possibilities boundary