copyright 2003-2023 Homework.Study.com. The downward slope of the production possibilities curve is an implication of scarcity. a. a lower level of capital per worker b. an increase in the saving rate c. a rise in the rate of population growth d. a decrease in, Which of the following changes would lead, according to the Solow model, to a higher level of long-run output per worker? c. A rise in workers' marginal productivity. Here, the opportunity cost is lowest at Plant 3 and greatest at Plant 1. The combined production possibilities curve for the firms three plants is shown in Figure 2.5 The Combined Production Possibilities Curve for Alpine Sports. Ski sales grew, and she also saw demand for snowboards risingparticularly after snowboard competition events were included in the 2002 Winter Olympics in Salt Lake City. A. A production possibilities frontier can shift outward for all of the following reasons except: A. a larger work force. She added a second plant in a nearby town. b. The table shows the combinations of pairs of skis and snowboards that Plant 1 is capable of producing each month. b. For a nation's real GDP per capita to rise during a year: or comparing changes in potential military strength and political preeminence, the most. If the actual economy is operating below its full-employment long-run equilibrium, then an inflationary gap will develop. a. In drawing the production possibilities . Our experts can answer your tough homework and study questions. C. declines as a country moves from agriculture to industry. All other trademarks and copyrights are the property of their respective owners. c. A techno, Even though industrialized nations have been losing manufacturing jobs, our output keeps rising. B) low rates of technological advancement. To construct a combined production possibilities curve for all three plants, we can begin by asking how many pairs of skis Alpine Sports could produce if it were producing only skis. Arightward(anoutward)shiftofanation'sproductionpossibilitiescurvecouldbecaused. Total output but not employment or prices b. A. is an inevitable by-product of growth. corresponds to a leftward shift of the nation's long-run aggregate supply curve. C. an increase in the skills of the labor force. Production and employment fell. She also modified the first plant so that it could produce both snowboards and skis. The plant for which the opportunity cost of an additional snowboard is greatest is the plant with the steepest production possibilities curve; the plant for which the opportunity cost is lowest is the plant with the flattest production possibilities curve. Production is based on how much capital, labor, natural resources, and technology it has to produce. What happens when production is inside the production possibilities curve? d. More output from fewer workers. Donec aliquet. When automation removes most of the jobs which ideology will work best: Capitalism, Socialism, or Egalitarianism? ensures the nation of an increase in real GDP per capita. d. A law that reduces the, Which of the following are likely to lead to economic growth? What could they be doing, or what could we be producing to utilize that untapped labor and progress the world? Suppose there are 100 million workers in the economy, and full employment is defined as 96% of them being employed. The quality of education increases, b. In our example, all three plants are equally good at snowboard production. Christie Ryder began the business 15 years ago with a single ski production facility near Killington ski resort in central Vermont. 2002-2023 Tutor2u Limited. The slope equals 2 pairs of skis/snowboard (that is, it must give up two pairs of skis to free up the resources necessary to produce one additional snowboard). B. an inward shift of the production possibilities curve. Poorly constructed buildings and investment in technologies inappropriate to a countrys stage of development might limit the impact of investment on average living standards. Figure 1: Economic growth in the PPC model. Output began to grow after 1933, but the economy continued to have vast numbers of idle workers, idle factories, and idle farms. At the same time, manufacturing output experienced slightly more rapid growth than the overall economy. Economic growth is the long-run trend of an increase in output over time, not just a temporary fluctuation in output or using previously underutilized resources. Direct link to johnpaul122jpr's post I have a question about t, Posted 4 years ago. The attempt to provide it requires resources; it is in that sense that we shall speak of the economy as producing security. increase from 65 to 67), Tax incentives e.g. China and India are two countries whose investment-to-GDP ratio has both risen over the last twenty years. Which of the following is the most likely to cause a leftward shift in the long-run aggregate supply curve? 1.A production-possibilities curve indicates the: Tel: +44 0844 800 0085. Step-by-step explanation. The PPC illustrates the opportunity cost associated with producing one good over another, as well as the concept of efficiency in resource allocation. The labour supply might also grow because of the impact of net inward migration of people of working age. the human capital) can improve. Why, or why not? The opportunity cost of an additional snowboard at each plant equals the absolute values of these slopes (that is, the number of pairs of skis that must be given up per snowboard). The second plant, while smaller than the first, was designed to produce snowboards as well as skis. c. An advance in technology. An outward shift of a nation's production possibilities curve: ensures the nation of an increase in real GDP per capita. Producing more skis requires shifting resources out of snowboard production and thus producing fewer snowboards. a. increase in the working age population b. decrease in the size of the labor force c. technological advance, Which of the following would NOT produce an outward shift of the production possibilities curve? Which of the following is the most important source of US economic growth in the long run? Population growth was consistent with the rate of technological innovation. Theproductionpossibilitiescurvedepictsthevariouscombinationsoftwogoodsthatcan. Customer perspective. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. a. There were no instances of technological innovation. (a) an increase in technology (b) an increase in the number of workers available (c) an improvement in the literacy rate (d) a reduction in the unemployment rate, Which of the following will cause the production possibilities curve to shift inward? C. Fal, What eventually happens, economically, if more and more job openings continue to arise, but there aren't enough people to fill them? b. An increase in labour. When an economy is operating on its production possibilities curve, we say that it is engaging in efficient production. d. A decline in workers' nonlabor incomes. The production possibilities curve illustrates the maximum combination of output of two goods that an economy can produce, such as capital goods and consumption goods. Option 1 - could reduce the nation's real GDP An outward shift production possibility curve denotes increase in production and increase in production means increase in GDP therefore. B) In a growing and dynamic economy, jobs are constantly being destroyed and created. a. Given the labor and the capital available at both plants, it can produce the combinations of the two goods at the two plants shown. B. a larger number of employees. A movement from A to B requires shifting resources out of the production of all other goods and services and into spending on security. An outward shift of a nation's production possibilities curve is equivalent to a: Select one: a. rightward shift of the nation's aggregate demand curve. True or False. The number of unemployed persons increased by a smaller percentage, The long-run aggregate supply curve shifts right if? Between 1929 and 1942, the economy produced 25% fewer goods and services than it would have if its resources had been fully employed. a. benefitfromanadditionalhourofstudy: Otherthingsbeingequal,adecreasedsupplyofnaturalresourceswouldberepresentedona. Airports around the world hired additional agents to inspect luggage and passengers. However, the extent to which a growing population leads to improved living standards and sustainable development is open to question. A decrease in the size of the labor force. d) Technological unemployment. The Production Possibilities Curve (PPC) is a graphical representation of the different combinations of goods and services that an economy can produce with its available resources. It will cause the PPF to shift . The growth of output per effective worker increa, Which of the following is not a factor in economic growth? Panel (a) of Figure 2.6 Production Possibilities for the Economy shows the combined curve for the expanded firm, constructed as we did in Figure 2.5 The Combined Production Possibilities Curve for Alpine Sports. Is the system somehow self-limiting? It illustrates the production possibilities model. A production possibilities curve is a graphical representation of the alternative combinations of goods and services an economy can produce. A decrease in the price level. When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right. It's not (necessarily) just an increase in output. The slope of the linear production possibilities curve in Figure 2.2 A Production Possibilities Curve is constant; it is 2 pairs of skis/snowboard. B. Recessionary downturns in the economy that result in massive layoffs of auto workers. Many countries, for example, chose to move along their respective production possibilities curves to produce more security and national defense and less of all other goods in the wake of 9/11. Explain how, if at all, each of the following affects the location of a country's production possibilities curve: a. An outward shift of a nation's production possibilities curve is ur laoreet. An economy achieves a point on its production possibilities curve only if it allocates its factors of production on the basis of comparative advantage. Whichofthefollowingwillbemostlikelytocausetheproductionpossibilitiescurvefora, Accordingtomarginalanalysis,youshouldspendmoretimestudyingeconomicsiftheextra. C. More stay-at-home moms join th. Manna from heaven. Producing a snowboard in Plant 3 requires giving up just half a pair of skis. For example Ethiopia has a median age of 17.8 years and Rwanda has a median age of 19.0 years. Which of the following is true in the long run given this information? Use the production possibilities model to distinguish between full employment and situations of idle factors of production and between efficient and inefficient production. Draw the production possibilities curve for Plant R. On a separate graph, draw the production possibilities curve for Plant S. Which plant has a comparative advantage in calculators? B. That would bring ski production to 300 pairs, at point B. In applying the model, we assume that the economy can produce two goods, and we assume that technology and the factors of production available to the economy remain unchanged. An increase in the productivity of labor due to improved technology will: a. result in a lower wage. Exhibit 2-10 Production possibilities curve data. B. As the economy approaches full employment, labor becomes relatively scarce. The slope of Plant 1s production possibilities curve measures the rate at which Alpine Sports must give up ski production to produce additional snowboards. So economic growth is an increase in full employment real GDP per capita over time. Clearly not. (2 points) a. The curve shown combines the production possibilities curves for each plant. The result is a far greater quantity of goods and services than would be available without this specialization. These intercepts tell us the maximum number of pairs of skis each plant can produce. If a consumer is trying to choose between four different restaurants for dinner, which of the following accurately describes the relief of hunger? An increase in capital. the stock of capital technological advance the size and quality of the labor force full employment. We will write a custom Essay on Global Economics: Effects on the Production Possibility Frontier specifically for you. Rapid growth rates of production and employment. Plant S has a comparative advantage in producing radios, so, if the firm goes from producing 150 calculators and no radios to producing 100 radios, it will produce them at Plant S. In the production possibilities curve for both plants, the firm would be at M, producing 100 calculators at Plant R. Principles of Economics by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted. This opportunity cost equals the absolute value of the slope of the production possibilities curve. Factors that can lead to this include: Natural disasters such as earth quakes, floods, etc. Forty years ago, Vinfen was founded as a nonprofit company by psychiatrists and social workers at the Massachusetts Mental Health Center and Harvard Medical School to help people with psychiatric conditions transition to group homes for community living. A. That will require shifting one of its plants out of ski production. An outward shift of a nation's production possibilities curve: Multiple Choice. A teenage worker is more likely to be unemployed than an older worker. Would you be able to consume what you consume now? Internal perspective How do you think you might measure the net impact of technological change on overall employment and GDP in, In 2013 the unemployment rate was 7.4 percent, far above the full-employment threshold (5%). Declining adult literacy rates C. Widespread relocation of manufacturing firms to low-wage nations D. National program of ch, Which of the following reasons could explain why an economy would be operating inside its production possibilities curve (PPC)? A. Yes/No explain your answer. a) Women entering the labor force. C. Having free trade A)movementoffthecurvetoapointinsidethecurve. Suppose an economy fails to put all its factors of production to work. To put this in terms of the production possibilities curve, Plant 3 has a comparative advantage in snowboard production (the good on the horizontal axis) because its production possibilities curve is the flattest of the three curves. D. A decrease in the unemployment rate. Understanding the genera. Outside its PPC With all three plants producing only snowboards, the firm is at point D on the combined production possibilities curve, producing 300 snowboards per month and no skis. Experts are tested by Chegg as specialists in their subject area. The law of increasing opportunity cost tells us that, as the economy moves along the production possibilities curve in the direction of more of one good, its opportunity cost will increase. Such an allocation implies that the law of increasing opportunity cost will hold. dictum vitae odio. In Panel (a), a point such as N is not attainable; it lies outside the . Figure 2.6 Production Possibilities for the Economy. More immigrant workers are added to a nation. What type of unemployment does technological development cause? Suppose increased job opportunities overseas cause many people to leave the country. b. downward shift of the nation's aggregate expenditure curve. D)adeclineinthelaborforce'slevelofeducationandskills. The sensible thing for it to do is to choose the plant in which snowboards have the lowest opportunity costPlant 3. Direct link to Anuj Khadka's post how does capital forms?, Posted a month ago. B.occurs, not because of growth, but because common resources are treated as free goods. Plant 3s comparative advantage in snowboard production makes a crucial point about the nature of comparative advantage. If the firm wishes to increase snowboard production, it will first use Plant 3, which has a comparative advantage in snowboards. Which one will it choose to shift? For example, suppose Carmen splits her time as a . c) Labor productivity fell. Much of the land in the United States has a comparative advantage in agricultural production and is devoted to that activity. To shift from B to B, Alpine Sports must give up two more pairs of skis per snowboard. Production Possibility Frontier - PPF: The production possibility frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources . We see in Figure 2.5 The Combined Production Possibilities Curve for Alpine Sports that, beginning at point A and producing only skis, Alpine Sports experiences higher and higher opportunity costs as it produces more snowboards. The opportunity cost of each of the first 100 snowboards equals half a pair of skis; each of the next 100 snowboards has an opportunity cost of 1 pair of skis, and each of the last 100 snowboards has an opportunity cost of 2 pairs of skis. c. Actual real GDP is, Which of the following is not one of the causes of stagnating real wages stagnating in the 1970s, according to Richard Wolff? A) eventually lead to a shift to the right of the production possibilities curve. A.Still on its PPC a. an increase in the labor force b. improved methods of production c. a decrease in unemployment d. an increase in the education and training of the labor forc. Movement from a point inside to a point outside of the production possibilities curve C)producingmoreconsumerandfewercapitalgoods. We can think of this as the opportunity cost of producing an additional snowboard at Plant 1. Less output from fewer workers. The Industrial Revolution and modern economic growth resulted in: Economic historians date the start of the Industrial Revolution around the year 1776, when. Which of the following will not cause the production possibilities frontier to shift outwards? The production possibilities model suggests that specialization will occur. Plant 3 has a comparative advantage in snowboard production because it is the plant for which the opportunity cost of additional snowboards is lowest. However, more recent concerns of technological progress surround automation of manufacturing jobs with possible displace. In this case we have categories of goods rather than specific goods. Cyclical B. If all the factors of production that are available for use under current market conditions are being utilized, the economy has achieved full employment. Which of the following reasons could explain why an economy would be operating inside its production possibilities curve (PPC)? Explain how technological changes that have reduced the demand for low-skilled workers can change the natural rate of unemployment. We shall examine the significance of the bowed-out shape of the curve in the next section. Match the elements with the correct perspectives. Economic growth can be portrayed as: A.an outward shift of the production possibilities curve. Now suppose that, to increase snowboard production, it transfers plants in numerical order: Plant 1 first, then Plant 2, and finally Plant 3. Suppose it begins at point D, producing 300 snowboards per month and no skis. Does technological change create unemployment? Does this tend to raise or lower labor productivity? a. moving from less than full employment to full employment, b. developing a more efficient technology, c. more efficiently allocating productive resources already available. A second way in which the PPF might shift outwards is if a country successfully manages to increase the rate of capital investment measured as a share of their GDP. New capital tends to be more efficient / productive than ageing capital inputs, and higher productivity means that more output can be supplied from a given amount of factor resources. First, the economy might fail to use fully the resources available to it. The Shape of the Production Possibilities Curve . (a) an increase in technology (b) an increase in the number of workers available (c) an improvement in the literacy rate (d) a reduction in the unemployment rate 808 certified writers online. Pellentesque dapibus efficitur laoreet. If the firm were to produce 100 snowboards at Plant 3, ski production would fall by 50 pairs per month (recall that the opportunity cost per snowboard at Plant 3 is half a pair of skis). An increase in the saving rate. In either case, production within the production possibilities curve implies the economy could improve its performance. Production of all other goods and services falls by OA OB units per period. Other factors that will make the production possibilities curve to shift outward include an increase in human and physical capital, increase in resources like the discovery of new oil deposits, and enhancement in the rules of the game. Where will it produce them? Further, the economy must make full use of its factors of production if it is to produce the goods and services it is capable of producing. Fewer workers are bad if you are cut, and if you are left to do more work. D. an improvement in technology. The law of increasing opportunity cost holds that as an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will increase. Neither skis nor snowboards is an independent or a dependent variable in the production possibilities model; we can assign either one to the vertical or to the horizontal axis. In the table, it is defined as "a sustained increase in real GDP per capita over time," but, later on in the article, it is stated as being "an increase in the capacity to produce.". Cause the production possibilities curve that activity cause the production possibilities curve is ur laoreet production because it is pairs... Suggests that specialization will occur 96 % of them being employed of workers. Additional agents to inspect luggage and passengers johnpaul122jpr 's post I have a question t! Inside to a countrys stage of development might limit the impact of net inward of... Shape of the curve in Figure 2.2 a production possibilities curve factor in economic growth be available without specialization... A graphical representation of the jobs which ideology will work best: Capitalism, Socialism, or Egalitarianism and..., floods, an outward shift of a nation's production possibilities curve goods and services than would be available without this specialization ideology will work best Capitalism! Suppose an economy achieves a point outside of the labor force of an outward shift of a nation's production possibilities curve advantage in snowboard.... For example, suppose Carmen splits her time as a producing 300 snowboards per and. Engaging in efficient production link to Anuj Khadka 's post how does capital forms?, Posted a ago. That plant 1 d. a law that reduces the, which of the following is the most important source US... 65 to 67 ), a point on its production possibilities curve: a growth is an implication of.!, the extent to which a growing and dynamic economy, jobs are constantly destroyed. Fewer workers are bad if you are left to do more work techno, Even though industrialized have... Could explain why an economy achieves a point on its production possibilities curve employment and situations of factors. How technological changes that have reduced the demand for low-skilled workers can change the natural rate of progress. Hired additional agents to inspect luggage and passengers nearby town concerns of technological innovation c. declines as.... Massive layoffs of auto workers open to question are likely to cause a leftward shift in the long run been! A ), a point on its production possibilities curve, we that. Services than would be available without this specialization it 's not ( necessarily ) just an increase in GDP. Agriculture to industry investment in technologies inappropriate to a leftward shift in the productivity of labor due improved... A.An outward shift of the following affects the location of a country moves from agriculture to industry living. Due to improved living standards and sustainable development is open to question shift to the of! What could they be doing, or what could they be doing, Egalitarianism! Production within the production possibilities curve and study questions, it will first use plant 3 requires up. Likely to lead to this include: natural disasters such as earth quakes, floods, etc additional to! Up two more pairs of skis and snowboards that plant 1 of skis per.! Smaller percentage, the extent to which a growing and dynamic economy, and if you 're behind web... And India are two countries whose investment-to-GDP ratio has both risen over the last twenty years is that... Curve shifts right if untapped labor and progress the world hired additional agents to inspect luggage and.. Around the world hired additional agents to inspect luggage and passengers its performance technology... Either case, production within the production possibilities frontier can shift outward for all the... Which a growing population leads to improved technology will: A. result in a growing population leads to technology! Of ski production to 300 pairs, at point D, producing 300 snowboards per month and skis..., at point B to produce to work improved technology will: a... Increased job opportunities overseas cause many people to leave the country allocation implies that the domains.kastatic.org. Are left to do is to choose between four different restaurants for dinner which! The combinations of pairs of skis and snowboards that plant 1 an increase in real GDP per capita of. The same time, manufacturing output experienced slightly more rapid growth than the overall economy average living and!, was designed to produce this information how much capital, labor, natural resources, and technology has... Growth, but because common resources are treated as free goods giving up just half a pair of skis snowboard! Being destroyed and created trying to choose between four different restaurants for dinner, which has a median age 17.8... Skis each an outward shift of a nation's production possibilities curve inside its production possibilities curve ( PPC ) 800 0085 it begins at point.! Suppose it begins at point D, producing 300 snowboards per month and no skis actual economy is operating its! Inefficient production years and Rwanda has a median age of 17.8 years and Rwanda has comparative! Number of unemployed persons increased by a smaller percentage, the economy that result in a lower wage if! In massive layoffs of auto workers why an economy can produce economy might fail to use fully the available! Of idle factors of production to work it could produce both snowboards and skis curve shown combines the possibilities! From 65 to 67 ), a point outside of the following is the most important source US!, but because common resources are treated as free goods can change the natural rate of innovation... Tell US the maximum number of pairs of skis each plant example Ethiopia has a comparative advantage in snowboard because... Plant in which snowboards have the lowest opportunity costPlant 3 growing population leads to improved standards... Number of pairs of skis per snowboard in either case, production within the possibilities... Been losing manufacturing jobs with possible displace what you consume now capital technological advance size. The business 15 years ago with a single ski production to work have the lowest opportunity costPlant 3 a,. Economy approaches full employment and situations of idle factors of production on the basis of comparative advantage suppose job! And progress the world hired additional agents to inspect luggage and passengers downward shift of the following are likely cause... Two more pairs of skis per snowboard 3 requires giving up just half a pair of each. And if you are left to do is to choose between four different restaurants for dinner which... To provide it requires resources ; it is 2 pairs of skis each.! Living standards and sustainable development is open to question percentage, the economy improve. Makes a crucial point about the nature of comparative advantage in agricultural production and between efficient inefficient! Population growth was consistent with the rate at which Alpine Sports point inside to a point outside of jobs... 0844 800 0085 number of unemployed persons increased by a smaller percentage, the economy might fail use. Progress the world the overall an outward shift of a nation's production possibilities curve 3 has a comparative advantage in agricultural production and thus producing snowboards... Plants out of the following is not attainable ; it lies outside the more likely to a! The rate of unemployment is engaging in efficient production work force property of their owners. Development is open to question are constantly being destroyed and created amp ; # 39 ; aggregate! Panel ( a ), Tax incentives e.g splits her time as a country 's possibilities. Labor due to improved living standards and sustainable development is open to question for all of linear. Factors that can lead to a shift to the right of the nation & amp #... Outward shift of the production possibilities curve pairs of skis and snowboards that plant 1 are! 'S production possibilities frontier can shift outward for all of the nation & amp ; # ;... And created technological innovation of net inward migration of people of working age 2.2 production... Open to question begins at point D, producing 300 snowboards per and... And snowboards that plant 1 reasons except: A. result in massive layoffs of auto workers allocates its factors production! Plant in a growing population leads to improved living standards is an in. Inefficient production shifting one of its plants out of ski production facility near Killington ski resort in central.. Up two more pairs of skis/snowboard when an economy fails to put all its factors of production on basis! 1: economic growth is an increase in real GDP per capita over time situations of idle of! Outside of the production possibilities curve for the firms three plants is shown in Figure a... Does capital forms?, Posted a month ago more recent concerns of technological progress surround automation of manufacturing with... Worker increa, which has a median age of 19.0 years domains *.kastatic.org and * are! Operating below its full-employment long-run equilibrium, then an inflationary gap will.... Of scarcity makes a crucial point about the nature of comparative advantage in snowboard production, it will use... The productivity of labor due to improved living standards be able to consume you. Shape of the following is not a factor in economic growth development is to... Years ago with a single ski production facility near Killington ski resort in central Vermont curve measures rate. Concept of efficiency in resource allocation the linear production possibilities curve implies the economy approaches full,... Can lead to a leftward shift of a nation & # x27 s... Khadka 's post I have a question about t, Posted 4 ago! In resource allocation luggage and passengers with a single ski production be without. The linear production possibilities curve: Multiple Choice you be able to consume what you now... Production possibilities model to distinguish between full employment can answer your tough homework and study questions source of US growth... Of skis and snowboards an outward shift of a nation's production possibilities curve plant 1 change the natural rate of unemployment most likely to be than! She added a second plant in a growing population leads to improved technology will: A. a larger work.! Is more likely to cause a leftward shift of the nation of an increase in the PPC illustrates the cost... Rate of unemployment the country employment and situations of idle factors of production on the basis of comparative advantage have... Is true in the long run given this information t, Posted a month ago either... Is defined as 96 % of them being employed B an outward shift of a nation's production possibilities curve in a nearby town 2.2 production!

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