a. Second, it might not allocate resources on the basis of comparative advantage. The economy produces SA units of security and OA units of all other goods and services per period. Imagine that you are suddenly completely cut off from the rest of the economy. The U.S. economy looked very healthy in the beginning of 1929. b) Immigration. We assume that the factors of production and technology available to each of the plants operated by Alpine Sports are unchanged. It need not imply that a particular plant is especially good at an activity. It retains its negative slope and bowed-out shape. Two years later she added a third plant in another town. C. an increase in the skills of the labor force. Because technological innovati, Which of the following reasons could explain why an economy would be operating inside its production possibilities curve (PPC)? The greater the absolute value of the slope of the production possibilities curve, the greater the opportunity cost will be. We will write a custom Essay on Global Economics: Effects on the Production Possibility Frontier specifically for you. a. As the number of workers increases, it becomes difficult to monitor them. o Shifts in Aggregate Supply Factors that increase (decrease) LRAS: - Increase . If it then experiences an What happens when production is inside the production possibilities curve? Which of the following would tend to increase the natural unemployment rate? could increase the nation's real GDP, but not the real-. If a consumer is trying to choose between four different restaurants for dinner, which of the following accurately describes the relief of hunger? It has two plants, Plant R and Plant S, at which it can produce these goods. It illustrates the production possibilities model. How would a recession impact. The opportunity cost of skis at Plant 2 is 1 snowboard per pair of skis. It suggests that to obtain efficiency in production, factors of production should be allocated on the basis of comparative advantage. Nam lacinia pulvinar tortor nec facilisis. d. A rise in the rate of po, In the short run, why does a production function eventually display diminishing returns to labor? If it fails to do that, it will operate inside the curve. Workers, for example, specialize in particular fields in which they have a comparative advantage. D. A decrease in the unemployment rate. The table shows the combinations of pairs of skis and snowboards that Plant 1 is capable of producing each month. Economic growth can be portrayed as: A.an outward shift of the production possibilities curve. Which of the following is true in the long run given this information? In either case, production within the production possibilities curve implies the economy could improve its performance. There, 50 pairs of skis could be produced per month at a cost of 100 snowboards, or an opportunity cost of 2 snowboards per pair of skis. Plants 2 and 3, if devoted exclusively to ski production, can produce 100 and 50 pairs of skis per month, respectively. O could reduce the nation's real GDP. An increase in labour. a. an increase in labor b. an increase in capital c. an advance in technology d. destruction of resources, Which of the following likely results in a permanent increase in a nation's productive capacity? b. A production possibilities curve shows the combinations of two goods an economy is capable of producing. A rightward (an outward) shift of a nation's production possibilities curve could be caused by: A) a decrease in technology. This is a result of transferring resources from the production of one good to another according to comparative advantage. c) It causes un, In less developed countries, what does the brain drain refer to? LS23 6AD We will make use of this important fact as we continue our investigation of the production possibilities curve. We would say that Plant 1 has a comparative advantage in ski production. Figure 1: Economic growth in the PPC model. b. developing a more efficient technology. C)producingmoreconsumerandfewercapitalgoods. its production potential is decreases. A. labor force participation rate. I have a question about the definition of "economic growth." Now consider what would happen if Ms. Ryder decided to produce 1 more snowboard per month. B. D. On one of the axes of its PPC, Chapter 3- Demand, Supply, and Market Equilib, Chapter 4 - Market Failures: Public Goods and, Chapter 3 - Demand, Supply, and Market Equili, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Don Herrmann, J. David Spiceland, Wayne Thomas, Pathophysiology NYU Final (PrepU Questions We. If the economy were to . Specialization means that an economy is producing the goods and services in which it has a comparative advantage. Step-by-step explanation. Our experts can answer your tough homework and study questions. Much of the land in the United States has a comparative advantage in agricultural production and is devoted to that activity. In this video I explain how the production possibilities curve shifts when there is a change in resources or a change in technology. some examples of questions that can be answered using that model. Now suppose the firm decides to produce 100 snowboards. Explain. To see this relationship more clearly, examine Figure 2.3 The Slope of a Production Possibilities Curve. Put calculators on the vertical axis and radios on the horizontal axis. Given the labor and the capital available at both plants, it can produce the combinations of the two goods at the two plants shown. Christie Ryder began the business 15 years ago with a single ski production facility near Killington ski resort in central Vermont. Internal perspective Alpine Sports can thus produce 350 pairs of skis per month if it devotes its resources exclusively to ski production. How would this affect the nation's production possibilities curve? Explain the reasons for the scarcity of labor. In drawing the production possibilities . O ensures the nation of an increase in real GDP per capita. More output from more workers. Could an economy that is using all its factors of production still produce less than it could? An increase in the age of the working population. The production possibility curve represents the various combinations of the amount of goods that can be produced used the given/available resources and technology graphically. Had the firm based its production choices on comparative advantage, it would have switched Plant 3 to snowboards and then Plant 2, so it would have operated at point C. It would be producing more snowboards and more pairs of skisand using the same quantities of factors of production it was using at B. C. modern technology. Economic growth means that an economy has increased its ability to produce more. It is, Assume that political instability around the world causes American business firms to decrease business investment signaling the start of a recession in the economy. At point A, Alpine Sports produces 350 pairs of skis per month and no snowboards. It's not (necessarily) just an increase in output. We begin at point A, with all three plants producing only skis. An outward shift of a nation's production possibilities curve: Labor productivity is defined as: An increase in the number of hours factories is in use. D. Improved labor productivity. Because shrinking population has reduced the number of productive workers in the economy b. D. increased for unmarried women but decreased for married women. C.increased due to higher wages, expanded job accessibility, changing preferences and Tel: +44 0844 800 0085. At point A, the economy was producing SA units of security on the vertical axisdefense services and various forms of police protectionand OA units of other goods and services on the horizontal axis. Join us in London, Birmingham, Bristol or Portsmouth for a Grade Booster Cinema Workshop and smash your exams this summer! Total output but not employment or prices b. key elements of the model. Use the production possibilities model to distinguish between full employment and situations of idle factors of production and between efficient and inefficient production. c) a decline in the economy's total production. An outward shift of a nation's production possibilities curve: Multiple Choice. A. Leftward shift of the production possibilities curve Course Hero is not sponsored or endorsed by any college or university. A lower level of capital per worker. What jobs have been automated? Production is based on how much capital, labor, natural resources, and technology it has to produce. Which of the following will not shift an economy's production possibilities curve outward? The reduction in unemployment. Lorem ipsum dolor sit amet, consectetur adipiscing elit. 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. A. an upgrading of the quality of a nation's human resources B. the reduction of unemployment C. an increase in the quantity of a society's labor force D. the improvement of a society's technological knowledge, If someone produced too . An increase in the labor force b. O could increase the nation's real GDP, but not the real- GDP per capita. Suppo. Does technological change create unemployment? B. it is easier to reduce poverty when the economy is growing than when it is not. the various options of output from the combination of the two products are represented in this graph. C. the ratio of real capital to worker-hours. We reviewed their content and use your feedback to keep the quality high. 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. ii. 2002-2023 Tutor2u Limited. But the production possibilities model points to another loss: goods and services the economy could have produced that are not being produced. The production possibilities curves for the two plants are shown, along with the combined curve for both plants. Suppose Plant 1 is producing 100 pairs of skis and 50 snowboards per month at point B. The opportunity cost of the first 200 pairs of skis is just 100 snowboards at Plant 1, a movement from point D to point C, or 0.5 snowboards per pair of skis. Economics questions and answers. Economists conclude that it is better to be on the production possibilities curve than inside it. iv. Suppose the first plant, Plant 1, can produce 200 pairs of skis per month when it produces only skis. Suppose an economy fails to put all its factors of production to work. Figure 2.4 Production Possibilities at Three Plants shows production possibilities curves for each of the firms three plants. Clearly, the transfer of resources to the effort to enhance national security reduces the quantity of other goods and services that can be produced. In an actual economy, with a tremendous number of firms and workers, it is easy to see that the production possibilities curve will be smooth. Suppose Alpine Sports operates the three plants we examined in Figure 2.4 Production Possibilities at Three Plants. Direct link to SulakShana Sumaruth's post Distinguish between econo, Posted 5 years ago. expansion in its production capacity, but its total spending does not rise as fast as its capacity, Notice the curve still has a bowed-out shape; it still has a negative slope. Plant 3s comparative advantage in snowboard production makes a crucial point about the nature of comparative advantage. o Shifts in LRAS are an alternative way of indicating there has been a shift in the economy's production possibilities curve. The slope of Plant 1s production possibilities curve measures the rate at which Alpine Sports must give up ski production to produce additional snowboards. Increased globalization that moves the economy from a manufacturing-based economy to a more service-based economy c. A recession caused by a dro. 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. Higher productivity tends to lead - over time to improved wages, growing per capita incomes and lifts many people out of poverty since it allows them to increase their consumption of essential products. a. A teenage worker is more likely to be unemployed than an older worker. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Experts are tested by Chegg as specialists in their subject area. Economic growth is being able to make more things. b. C) Without unemployment insurance, the aver, Suppose an economy experiences an increase in productivity. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Tax free (subsidised) child care working mothers and fathers, Higher minimum wage, extension of the (voluntary) living wage, Changes to the official state retirement age (i.e. The economy is in the peak phase of the business cycle. A.total output/worker-hours. Because technological innov. The curve shown combines the production possibilities curves for each plant. Pellentesque dapibus efficitur laoreet. 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. It is a visualization of production possibilities for two goods. A decrease in growth rates will cause: A. no shift of an economy's production possibilities curve B. an outward shift of an economy's production possibilities curve C. a movement from a point inside a; The potential output of an economy is: A. the output level at which nominal GDP is equal to real GDP. ", Which of the following best describes the impact of technological change on labor? Which of the following will not produce an outward shift of the production possibilities curve? Investment in capital goods such as new plant and machinery, factories, new hardware and software and investment in critical infrastructure leads to a higher capital stock. Instead of the bowed-out production possibilities curve ABCD, we get a bowed-in curve, ABCD. Now suppose that, to increase snowboard production, it transfers plants in numerical order: Plant 1 first, then Plant 2, and finally Plant 3. Producing a snowboard in Plant 3 requires giving up just half a pair of skis. Movement from a point inside to a point outside of the production possibilities curve Think about what life would be like without specialization. a. Here, an economy that can produce two categories of goods, security and all other goods and services, begins at point A on its production possibilities curve. B. a. However, more recent concerns of technological progress surround automation of manufacturing jobs with possible displace. B) When an economy is at full employment, does that mean that unemployment is zero? This might come about either from the natural growth of a countrys population especially for nations with a low median age. To log in and use all the features of Khan Academy, please enable JavaScript in your browser. Increasing the availability of these goods would improve the standard of living. This might be alleviated by the ability to import. Do things automatically return, Which of the following is likely to cause an outward shift of the production possibilities curve? Which of the following is not predicted by the technology shock driven real business cycle (RBC) theory? These are also illustrated with a production possibilities curve. What is technological unemployment?