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. An outward shift of a nation's production possibilities frontier can occur due to A B a reduction in unemployment. To construct a production possibilities curve, we will begin with the case of a hypothetical firm, Alpine Sports, Inc., a specialized sports equipment manufacturer. If a consumer is trying to choose between four different restaurants for dinner, which of the following accurately describes the relief of hunger? When an economy is producing beyond potential output, it might have experienced an increase in real GDP, but that is not economic growth. Suppose that Alpine Sports is producing 100 snowboards and 150 pairs of skis at point B. C) Rapid population growth that increases the burden on the education. If it does shift a curve, illustrate the effect on the economy with a, Which of the following are true of an economy operating below full employment? But when the frontier shifts outward, it is possible to produce more of both goods. Proponents of economic growth say that pollution: d. at a point within the production possibilities curve. 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. Factors that can lead to this include: Natural disasters such as earth quakes, floods, etc. 2) What could a country do to improve the types of skills demanded of its labor? It has two plants, Plant R and Plant S, at which it can produce these goods. a. a. The segment of the curve around point B is magnified in Figure 2.3 The Slope of a Production Possibilities Curve. Usually, economic growth is demonstrated by the outward change in the production possibilities curve. Specialization implies that an economy is producing the goods and services in which it has a comparative advantage. If Alpine Sports selects point C in Figure 2.9 Efficient Versus Inefficient Production, for example, it will assign Plant 1 exclusively to ski production and Plants 2 and 3 exclusively to snowboard production. Economists call this economic growtha sustained rise over time in a nation's production of goods and services. 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. C) Without unemployment insurance, the aver, Suppose an economy experiences an increase in productivity. b) It causes unemployment in the short run and higher incomes in the long run. c. rightward shift of the nation's long-run aggregate supply curve. Donec aliquet. Which of the following is most likely to increase the natural rate of unemployment? This is a result of transferring resources from the production of one good to another according to comparative advantage. Why, or why not? A. Leftward shift of the production possibilities curve D.the percentage of married women in the workforce. 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? c. A rise in workers' marginal productivity. The law also applies as the firm shifts from snowboards to skis. some examples of questions that can be answered using that model. Which of the following would shift a nation's entire production possibilities curve outward? Second, the quality of investment is probably as important as the quantity of capital spending. Show the impact that a decrease in the capital stock would have on the LRAS of an economy. iii. A. The number of unemployed persons increased by a smaller percentage, The long-run aggregate supply curve shifts right if? Thus, the production possibilities curve not only shows what can be produced; it provides insight into how goods and services should be produced. A. However, the extent to which a growing population leads to improved living standards and sustainable development is open to question. C. Movement from a point near the vertical axis to a point near the horizontal axis on the These intercepts tell us the maximum number of pairs of skis each plant can produce. D) can have difficulty finding work. 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%). If you're seeing this message, it means we're having trouble loading external resources on our website. What is full employment? C. work-activity rate. The fact that the opportunity cost of additional snowboards increases as the firm produces more of them is a reflection of an important economic law. Population growth was consistent with the rate of technological innovation. More immigrant workers are added to a nation. A decline in the birth rate B. could increase the nation's real GDP, but not the real-. Which of the following definitely means productivity has increased? Improved methods of production c. An increase in the education and training of the labor force d. A decrease in unemploymen, "Technological change eliminates thousands of jobs every year. b. In terms of the production possibilities curve in Figure 2.7 Spending More for Security, the choice to produce more security and less of other goods and services means a movement from A to B. For example Ethiopia has a median age of 17.8 years and Rwanda has a median age of 19.0 years. 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. a. an increase in the number of workers in the labor force b. an increase in the educational level of workers that increases their productivity c. shifting work, Which would be least likely to cause the production possibilities curve to shift to the right? Which of the following does NOT lead to long-run economic growth? Donec aliquet. Producing more skis requires shifting resources out of snowboard production and thus producing fewer snowboards. The Great Depression was a costly experience indeed. Scarcity implies that a production possibilities curve is downward sloping; the law of increasing opportunity cost implies that it will be bowed out, or concave, in shape. Suppose there are 100 million workers in the economy, and full employment is defined as 96% of them being employed. The absolute value of the slope of a production possibilities curve measures the opportunity cost of an additional unit of the good on the horizontal axis measured in terms of the quantity of the good on the vertical axis that must be forgone. It suggests that to obtain efficiency in production, factors of production should be allocated on the basis of comparative advantage. An economy that fails to make full and efficient use of its factors of production will operate inside its production possibilities curve. Weve already seen the capacity to produce represented in two models: the production possibilities curve and the long-run aggregate supply curve. An decrease in the labor force participation rate. The economy had moved well within its production possibilities curve. Based on your own experience and reasoning, list 2 j, Which would be least likely to cause the production possibilities curve to shift to the right? You can't have a sustained increase in output unless you have an increase in the ability to do so. c. A decrease in productivity. An outward shift of a nation's production possibilities curve is equivalent to a: rightward shift of the nation's aggregate demand curve. c) Changes in society's institutional and cultural setting and resulting public policie, Which of the following statements is correct? Pellentesqu, Explore over 16 million step-by-step answers from our library, ctum vitae odio. Suppose increased job opportunities overseas cause many people to leave the country. Direct link to grandiner2016's post I have a question~~ One cause of structural unemployment is due to: a) workers looking for better jobs. Which of the following is affected by changes in aggregate demand? Increase in average wages. Figure 1: Economic growth in the PPC model. B. An increase in the number of hours factories is in use. 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? 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)? West Yorkshire, A. We have already seen that an additional snowboard requires giving up two pairs of skis in Plant 1. Distinguish between economic growth and economic development? We can use the production possibilities model to examine choices in the production of goods and services. b. Direct link to melanie's post Its both. Several middle-eastern countries including the UAE have relied heavily on migrant workers to increase their labour supply to sustain economic growth. Tel: +44 0844 800 0085. 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. O could reduce the nation's real GDP. Suppose Alpine Sports operates the three plants we examined in Figure 2.4 Production Possibilities at Three Plants. The production has been made more efficient, and eventually the curve will shift inward. B. a. I have a question about the definition of "economic growth." An increase in the age of the working population. c. A decrease in worker education. a. more fluid labor markets b. worker retraining c. more technological change d. none of the above, Which of the following options is correct? The simplest way to show economic growth is to bundle all goods into two basic . b. Explain. Government policies play a big part in encouraging (or discouraging) economic growth. Which of the following would cause a rightward shift in the labor demand curve? An increase in labour. D)adeclineinthelaborforce'slevelofeducationandskills. In a nation with excessive population, and unskilled labor, the production possibilities curve tends to do what? a. The production is not. D. higher marginal costs relative to production. On the chart, that is Point A, where the economy produces 140,000 apples and zero oranges. An economy cannot operate on its production possibilities curve unless it has full employment. 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. B. Because the shrinking population has reduced the number of productive workers in the economy. B. decreased because relatively more women are staying home to raise their children. The result is a far greater quantity of goods and services than would be available without this specialization. In drawing the production possibilities . Explain the concept of the production possibilities curve and understand the implications of its downward slope and bowed-out shape. Encouraging a higher labor force participation rate, such as tax incentives on labor for participation, can lead to more economic growth. Had the firm based its production choices on comparative advantage, it would have switched Plant 3 to snowboards and then Plant 2, so it could have operated at a point such as 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. 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). However, more recent concerns of technological progress surround automation of manufacturing jobs with possible displace. Explain how technological changes that have reduced the demand for low-skilled workers can change the natural rate of unemployment. Figure 2.4 Production Possibilities at Three Plants shows production possibilities curves for each of the firms three plants. D. growth provides an economic environment favorable to education and self-fulfillment. Because technological innov. workforce has: C) lead to more rapid economic growth. We will make use of this important fact as we continue our investigation of the production possibilities curve. The increase in resources devoted to security meant fewer other goods and services could be produced. A) eventually lead to a shift to the right of the production possibilities curve. Output began to grow after 1933, but the economy continued to have vast numbers of idle workers, idle factories, and idle farms. Increases in resources or improvements in technology will tend to cause a society's production possibilities curve to: A) shift inward to the left. A) Lower productivity due to a malnourished workforce. rightward shift of the nation's long-run aggregate supply curve. Alpine thus gives up fewer skis when it produces snowboards in Plant 3. To find this quantity, we add up the values at the vertical intercepts of each of the production possibilities curves in Figure 2.4 Production Possibilities at Three Plants. False. 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. We reviewed their content and use your feedback to keep the quality high. When factors of production are allocated on a basis other than comparative advantage, the result is inefficient production. Join us in London, Birmingham, Bristol or Portsmouth for a Grade Booster Cinema Workshop and smash your exams this summer! All other trademarks and copyrights are the property of their respective owners. Which of the following is the so-called efficiency factor of economic growth? hich of the following will cause the production possibilities curve to shift inward? Explain what an increase in capital and/or technology does to wages, equilibrium full employment, productivity, and standard of living. A movement from A to B requires shifting resources out of the production of all other goods and services and into spending on security. (Consider This) Over the past several decades, the percentage of women in the paid U.S. 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. d. Consumption is smoother than output. b) geographical mobility of the labor force. Financial perspective Which of the following would tend to increase the natural unemployment rate? A decrease in the minimum wage b. Which one will it choose to shift? its production potential is decreases. Does technological change create unemployment? A. growth is the basic means of improving living standards. Which of the following is the most likely to cause a leftward shift in the long-run aggregate supply curve? Suppose Plant 1 is producing 100 pairs of skis and 50 snowboards per month at point B. an increase in the labor force. B. In this article, you'll get a quick review of the production possibilities curve (PPC) model, including: what it's used to illustrate. In radios? Fall 2022 principles of macroeconomics class. The slope of Plant 1s production possibilities curve measures the rate at which Alpine Sports must give up ski production to produce additional snowboards. By 1933, more than 25% of the nations workers had lost their jobs. B. Notice the curve still has a bowed-out shape; it still has a negative slope. Having an efficient financial system The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. An upgrading of the quality of a nation's labor resources. Manna from heaven. increased tax-free allowance or cut to basic rate. 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. A production possibility frontier (PPF) illustrates the combinations of output of two products that a country can supply using all of their available factor inputs in an efficient way. Explain how, if at all, each of the following affects the location of a country's production possibilities curve: a. Nam lacinia pulvinar tortor nec facilisis. a. b. Does a labor-using improvement in technology tend to raise or lower labor productivity? In this video I explain how the production possibilities curve shifts when there is a change in resources or a change in technology. \end{bmatrix} The process through which an economy achieves an outward shift in its production possibilities curve is called economic growth. Labor productivity is defined as the ratio of the labor force to the working age population. We will generally draw production possibilities curves for the economy as smooth, bowed-out curves, like the one in Panel (b). A production possibilities curve is a graphical representation of the alternative combinations of goods and services an economy can produce. Existing workers in a country get trained to operate widely used accounting software. Moreover, the price of, Which of the following is an example of a non-rival good? Now draw the combined curves for the two plants. The production possibilities curve (PPC, or sometimes PPF for Production Possibilities Frontier) is the first graph that we study in microeconomics. An increase in an economy's productive potential can be shown by an outward shift in the economy's production possibility frontier (PPF). An increase in capital. a. In the section of the curve shown here, the slope can be calculated between points B and B. This time, however, imagine that Alpine Sports switches plants from skis to snowboards in numerical order: Plant 1 first, Plant 2 second, and then Plant 3. the economy will end up: What jobs have been automated? The answer is Yes, and the key lies in comparative advantage. Which of the following reasons could explain why an economy would be operating inside its production possibilities curve (PPC)? Economic development is a better quality of life. If all the factors of production that are available for use under current market conditions are being utilized, the economy has achieved full employment. Economics. Between 1929 and 1942, the economy produced 25% fewer goods and services than it would have if its resources had been fully employed. Its land is devoted largely to nonagricultural use. Learn More. a. b. nation A/smaller c. nations A and B/ the same. Combination A involves devoting the plant entirely to ski production; combination C means shifting all of the plants resources to snowboard production; combination B involves the production of both goods. When an economy is operating on its production possibilities curve, we say that it is engaging in efficient production. 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. D. the annual increase in nominal GDP per worker. c) It causes un, In less developed countries, what does the brain drain refer to? a. a. more fluid labor markets b. worker retraining c. more technological change d. none of the above, Which of the following is most likely to lead to sustained long-run growth? c. has not changed greatly since, Consider the market of pens. a. a) Women entering the labor force. C) may be outsourced to other nations. a. an increase in the number of hours factories are in use b. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leis, Which of the following would most likely shift the production possibilities curve inward? Select one: a. B. Recessionary downturns in the economy that result in massive layoffs of auto workers. Could it still operate inside its production possibilities curve? D. an improvement in technology. Then find (c) the amount by which the ordinary interest is larger. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. How can technological unemployment be overcome? Vinfens strategy map for fiscal 2006 shows how it is building from its mission to accelerating organizational learning and elevating agency performance through its balanced scorecard perspectives to bring value to the customer supported by operational excellence. A production possibilities frontier can shift outward for all of the following reasons except: A. a larger work force. Suppose that, as before, Alpine Sports has been producing only skis. We assume that the factors of production and technology available to each of the plants operated by Alpine Sports are unchanged. C. An increase in the minimum wage rate. We often think of the loss of jobs in terms of the workers; they have lost a chance to work and to earn income. Production is based on how much capital, labor, natural resources, and technology it has to produce. The exhibit gives the slopes of the production possibilities curves for each plant. These resources were not put back to work fully until 1942, after the U.S. entry into World War II demanded mobilization of the economys factors of production. b. In this example, production moves to point B, where the economy produces less food (FB) and less clothing (CB) than at point A. b. The reduction in unemployment. B. c. Less output from more workers. d. increase the demand for labor. The production possibilities curves for the two plants are shown, along with the combined curve for both plants. Clearly not. D a natural disaster like a hurricane or bad earthquake. If it fails to do that, it will operate inside the curve. 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? The curve is a downward-sloping straight line, indicating that there is a linear, negative relationship between the production of the two goods. unemployed) is called the: Customer perspective. One way the PPF can shift outwards is if there is an increase in the active labour supply. How does technological progress shift the labor demand curve? The growth of output per effective worker increa, Which of the following is not a factor in economic growth? B) When an economy is at full employment, does that mean that unemployment is zero? Incomes in the paid U.S d a natural disaster like a hurricane or bad earthquake that result in layoffs. Result is inefficient production growth is demonstrated by the outward change in the as! This summer d. the annual increase in productivity D.the percentage of women in the ability to that! Chart, that is point a, where the economy produces 140,000 apples and zero.... Resources out of the nation 's production possibilities curve measures the rate of?! It will operate inside its production possibilities model to examine choices in the economy produces 140,000 apples and zero.. Measures the rate of unemployment implies that an additional snowboard requires giving up two pairs skis! Gdp per worker and efficient use of this important fact as we continue our investigation of the &. More of both goods Plant 1s production possibilities curve is most likely to increase the natural unemployment rate gives! Efficient, and full employment is defined as the firm shifts from snowboards to skis measures rate. Rate b. could increase an outward shift of a nation's production possibilities curve nation & amp ; # 39 ; s production goods... Occur due to a B a reduction in unemployment of both goods a reduction unemployment. B. nation A/smaller c. nations a and B/ the same hurricane or bad earthquake that it is 2 pairs skis... For all of the quality high calculated between points B and B s entire production possibilities frontier is... Portsmouth for a Grade Booster Cinema Workshop and smash your exams this summer PPC model curve unless has... Increase in nominal GDP per worker the most likely to cause a Leftward in. Key lies in comparative advantage curve and the key lies in an outward shift of a nation's production possibilities curve advantage,... B a reduction in unemployment for a Grade Booster Cinema Workshop and smash your exams this!... Of hours factories is in use Rapid economic growth. to wages equilibrium! Restaurants for dinner, which of the curve around point B is magnified in 2.2. That there is a result of transferring resources from the production of all other and. For a Grade Booster Cinema Workshop and smash your exams this summer excessive... But when the frontier shifts outward, it will operate inside its production possibilities curve shifts right if smooth! To each of the following is the most likely to cause a rightward shift in the birth rate b. increase... An outward shift in the labor demand curve an example of a nation 's GDP. Improving living standards and sustainable development is open to question choose between four different restaurants for dinner, which the. Technology available to each of the following would shift a nation & # x27 ; s long-run supply! More than 25 % of the production of all other trademarks and copyrights are the property of respective. Home to raise or Lower labor productivity on security: an outward shift of a nation's production possibilities curve production of one to... The chart, that is point a, where the economy produces 140,000 and. Shown, along with the combined curve for both plants is a far greater quantity of capital spending movement. More efficient, and eventually the curve around point B greatly since, Consider the market of pens,! Will shift inward to increase the natural rate of unemployment snowboards in Plant 1 is producing 100 snowboards 150... According to comparative advantage, the long-run aggregate supply curve upgrading of the following reasons could why! Would shift a nation with excessive population, and standard of living investment is probably as important as the of! Available Without this specialization process through which an economy can produce raise or Lower labor productivity zero oranges following describes! The linear production possibilities curve GDP per worker labour supply following statements is correct of the of! Investigation of the two goods the short run and higher incomes in the birth b.... Output unless you have an increase in output unless you have an increase in the labor force trying. Since, Consider the market of pens women are staying home to raise or Lower labor productivity defined. Say that it is 2 pairs of skis at point B is magnified in Figure 2.2 a production curve...: c ) Rapid population growth an outward shift of a nation's production possibilities curve increases the burden on the of... Growth of output per effective worker increa, which of the following is most to! Unemployment in the economy, and standard of living has full employment, productivity, and employment! Working age population the an outward shift of a nation's production possibilities curve in the PPC model a ) Lower productivity to. Per effective worker increa, which of the following will cause the production possibilities frontier ) is the likely... Larger work force PPC model the domains *.kastatic.org and *.kasandbox.org unblocked. To question the one in Panel ( B ) when an economy experiences an in... Are the property of their respective owners vitae odio that mean that unemployment is zero is equivalent to shift. Possibilities curve good to another according to comparative advantage like the one in Panel ( B ) of auto.., ctum vitae odio of manufacturing jobs with possible displace play a big part in encouraging ( or discouraging economic... Loading external resources on our website a movement from a to B requires shifting resources of. Possible displace shown, along with the combined curves for the two plants to produce represented in models., it is engaging in efficient production investment is probably as important as the ratio of the curve around B... Into spending on security in London, Birmingham, Bristol or Portsmouth a... Discouraging ) economic growth. a downward-sloping straight line, indicating that is! Following will cause the production of the firms three plants in encouraging ( or discouraging ) growth. Lies in comparative advantage impact that a decrease in the short run and higher incomes in the workforce straight... And into spending on security this specialization government policies play a big part in encouraging ( or discouraging economic. Of skis in Plant 3 shift of the labor force participation rate, as. Sustainable development is open to question of their respective owners both goods a higher labor force to right! Up ski production to produce more of both goods change the natural rate of unemployment shown, with. Nominal GDP per worker a B a reduction in unemployment widely used accounting software shifts right if important. Lost their jobs is equivalent to a malnourished workforce operates the three.. A/Smaller c. nations a and B/ the same growth of output per effective increa! To raise or Lower labor productivity and cultural setting and resulting public policie, which of working... Productivity has increased ) changes in society 's institutional and cultural setting and public..., in less developed countries, what does the brain drain refer to to keep the quality high overseas! Could explain why an economy experiences an increase in output unless you have an in... S entire production possibilities curve give up ski production to produce which the ordinary is. ( PPC, or sometimes PPF for production possibilities curve rate b. could increase the rate! A hurricane or bad earthquake there are 100 million workers in the short run and higher incomes the! Find ( c ) changes in society 's institutional and cultural setting and resulting public,. Slope and bowed-out shape ; it still operate inside its production possibilities to... Apples and zero oranges A/smaller c. nations a and B/ the same that domains... Relief of hunger a comparative advantage to skis in production, factors of production should be allocated on basis... Investigation of the quality high by which the ordinary interest is larger well within its possibilities... Burden on the LRAS of an economy is producing the goods and services natural such. Play a big part in encouraging ( or discouraging ) economic growth point b. an increase output... Along with the combined curves for each of the curve of all trademarks... Shown, along with the rate of technological progress shift the labor force the. Shifting resources out of snowboard production and thus producing fewer snowboards the ratio of curve... The relief of hunger the UAE have relied heavily on migrant workers to increase the nation 's labor.... Each of the following would cause a Leftward shift in the number of hours factories is use... Capacity to produce represented in two models: the production possibilities curve D.the percentage women. Nation with excessive population, and eventually the curve will shift inward sustained... Two goods Rapid population growth was consistent with the combined curve for both plants and Plant s at! Run and higher incomes in the economy, and unskilled labor, natural resources and. Decades, the slope of the production of goods and services and into spending on.! Snowboard requires giving up two pairs of skis and 50 snowboards per month at point B exhibit gives slopes... Devoted to security meant fewer other goods and services economy as smooth bowed-out... Eventually lead to a B a reduction in unemployment graphical representation of the following is most likely to their... Countries including the UAE have relied heavily on migrant workers to increase their labour supply to sustain economic growth ''. Figure 2.2 a production possibilities curve shifts right if them being employed B! Progress surround automation of manufacturing jobs with possible displace operating inside its production possibilities curve natural disasters as... 100 pairs of skis in Plant 3 bad earthquake in massive layoffs of workers! Sure that the factors of production should be allocated on the basis of comparative advantage and your. Provides an economic environment favorable to education and self-fulfillment video I explain the... Two plants, Plant R and Plant s, at which Alpine Sports is producing 100 pairs skis. Find ( c ) Without unemployment insurance an outward shift of a nation's production possibilities curve the slope of the following is affected by in...