Now suppose that, to increase snowboard production, it transfers plants in numerical order: Plant 1 first, then Plant 2, and finally Plant 3. Economists often use models such as the production possibilities model with graphs that show the general shapes of curves but that do not include specific numbers. ensures the nation of an increase in real GDP per capita. B. Suppose Alpine Sports operates the three plants we examined in Figure 2.4 Production Possibilities at Three Plants. 2313 chapter 16 power point notes creating an C. average family size in the United States. c) a decline in the economy's total production. It illustrates the production possibilities model. Its land is devoted largely to nonagricultural use. The production possibilities curves for the two plants are shown, along with the combined curve for both plants. We will write a custom Essay on Global Economics: Effects on the Production Possibility Frontier specifically for you. An outward shift of a nation's production possibilities frontier can occur due to A B a reduction in unemployment. Poorly constructed buildings and investment in technologies inappropriate to a countrys stage of development might limit the impact of investment on average living standards. Ways of increasing the supply of labour available to an economy: Boston House, With an increasing automated workforce and ensuing technological unemployment, how will the poor, who trade labor for income, generate purchasing power within a market economy? 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). Alpine Sports can thus produce 350 pairs of skis per month if it devotes its resources exclusively to ski production. Donec aliquet. the various options of output from the combination of the two products are represented in this graph. Direct link to melanie's post Economic growth is being , Posted 3 years ago. a. The steeper the curve, the greater the opportunity cost of an additional snowboard. Study with Quizlet and memorize flashcards containing terms like Which of the following will not produce an outward shift of the production possibilities curve? d. Destruction of resources. Could an economy that is using all its factors of production still produce less than it could? 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. In that case, it produces no snowboards. To see this relationship more clearly, examine Figure 2.3 The Slope of a Production Possibilities Curve. Explain. We begin at point A, with all three plants producing only skis. Figure 2.9 Efficient Versus Inefficient Production. a. economic growth b. technological change c. productivity growth d. capital deepening. c. rightward shift of the nation's long-run aggregate supply curve. B.Reaching full production potential If the actual economy is operating below its full-employment long-run equilibrium, then an inflationary gap will develop. It has an advantage not because it can produce more snowboards than the other plants (all the plants in this example are capable of producing up to 100 snowboards per month) but because it is the least productive plant for making skis. For example, suppose Carmen splits her time as a . We may conclude that, as the economy moved along this curve in the direction of greater production of security, the opportunity cost of the additional security began to increase. d. More output from fewer workers. can have devastating effects on a country. Which of the following is not considered a source of increased labor efficiency? A. a decrease in worker education B. a decrease in government investment in R&D C. a decrease in interest rates D. a total ban on immigration E. an increase in the production o, Which of the following is most likely to cause a leftward shift in the long-run aggregate supply curve? Now consider what would happen if Ms. Ryder decided to produce 1 more snowboard per month. 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? Cyclical B. 2002-2023 Tutor2u Limited. How would an economy-wide technological improvement affect wages? The UK has seen strong inward migration over the last fifteen years (averaging over 200,000 a year) as has Canada. It has two plants, Plant R and Plant S, at which it can produce these goods. If it is using the same quantities of factors of production but is operating inside its production possibilities curve, it is engaging in inefficient production. D. a movement from one point to another point on a fixed production possibilities curve. Which of the following is not a factor that explains jobless recoveries? Such specialization is typical in an economic system. Remember that when the PPF is static, producing more gadgets means producing fewer widgetsthere is an opportunity cost. Figure 1: Economic growth in the PPC model. Comparative advantage thus can stem from a lack of efficiency in the production of an alternative good rather than a special proficiency in the production of the first good. Which of the following is most likely to increase the natural rate of unemployment? The AD curve will most likely shift to the left when this increase in productivity is the result of which of the following? We will generally draw production possibilities curves for the economy as smooth, bowed-out curves, like the one in Panel (b). Does this tend to raise or lower labor productivity? a. ensures the nation of an increase in real GDP per capita. Step-by-step explanation. Lorem ipsum dolor sit amet, consectetur adipiscing elit. On the chart, that is Point A, where the economy produces 140,000 apples and zero oranges. Donec aliquet. Explain what an increase in capital and/or technology does to wages, equilibrium full employment, productivity, and standard of living. i. Then find (c) the amount by which the ordinary interest is larger. If more workers join the labor force of a country, the unemployment rate tends to _______. Which of the following would tend to increase the natural unemployment rate? What type of unemployment does technological development cause? Join us in London, Birmingham, Bristol or Portsmouth for a Grade Booster Cinema Workshop and smash your exams this summer! A. Leftward shift of the production possibilities curve She added a second plant in a nearby town. Tel: +44 0844 800 0085. C. An increase in the minimum wage rate. c. A rise in workers' marginal productivity. Thus, the economy chose to increase spending on security in the effort to defeat terrorism. B. It is a visualization of production possibilities for two goods. Study notes, videos, interactive activities and more! Putting its factors of production to work allows a move to the production possibilities curve, to a point such as A. Nam risus, View answer & additonal benefits from the subscription, Explore recently answered questions from the same subject, Explore documents and answered questions from similar courses. A. Economic growth is an increase in the capability of an economy to make goods and services. copyright 2003-2023 Homework.Study.com. An economy cannot operate on its production possibilities curve unless it has full employment. Economics questions and answers. The sensible thing for it to do is to choose the plant in which snowboards have the lowest opportunity costPlant 3. c) Changes in society's institutional and cultural setting and resulting public policie, Which of the following statements is correct? The production of both goods rises. Which of the following was responsible for slower economic growth prior to the Industrial Revolution? Policies that encourage savings, and therefore investment in capital, lead to higher economic growth. Weve already seen the capacity to produce represented in two models: the production possibilities curve and the long-run aggregate supply curve. Explain. These are also illustrated with a production possibilities curve. This might come about either from the natural growth of a countrys population especially for nations with a low median age. C) producing more consumer and fewer capital goods. As the number of workers increases, it becomes difficult to monitor them. B. (2 points) Fireworks for everyone in their sightline A toll road A glass of water Seats at a movie theater An unclaimed spot on a beach Which, 1.08 Basic Economic Concepts Q. This might be alleviated by the ability to import. a. Because shrinking population has reduced the number of productive workers in the economy b. An increase in the age of the working population. In this section, we shall assume that the economy operates on its production possibilities curve so that an increase in the production of one good in the model implies a reduction in the production of the other. d. An increase in outsourcing. In the wake of the 9/11 attacks in 2001, nations throughout the world increased their spending for national security. b. A. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Why, or why not? We shall examine the significance of the bowed-out shape of the curve in the next section. B) are often more highly skilled than other workers. b) Reallocation of labor from less to more productive uses. C) lead to more rapid economic growth. The opportunity cost of skis at Plant 2 is 1 snowboard per pair of skis. As we combine the production possibilities curves for more and more units, the curve becomes smoother. Nam lacinia pulvinar tortor nec facilisis. B. decreased because relatively more women are staying home to raise their children. If it then experiences an Even though each of the plants has a linear curve, combining them according to comparative advantage, as we did with 3 plants in Figure 2.5 The Combined Production Possibilities Curve for Alpine Sports, produces what appears to be a smooth, nonlinear curve, even though it is made up of linear segments. The U.S. economy looked very healthy in the beginning of 1929. The downward slope of the production possibilities curve is an implication of scarcity. A. (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 Show the impact that a decrease in the capital stock would have on the LRAS of an economy. If the firm wishes to increase snowboard production, it will first use Plant 3, which has a comparative advantage in snowboards. 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. The slope of Plant 1s production possibilities curve measures the rate at which Alpine Sports must give up ski production to produce additional snowboards. (iii) There is a technological breakthrough th. Assume the economy moves from a situation with full employment to one in which the unemployment rate is higher. Increased globalization that moves the economy from a manufacturing-based economy to a more service-based economy c. A recession caused by a dro. C.increased due to higher wages, expanded job accessibility, changing preferences and The Shape of the Production Possibilities Curve . b. Production on the production possibilities curve ABCD requires that factors of production be transferred according to comparative advantage. 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. the more outward the shift in the graph the increase in the real GDP . An increase in the working-age population. D.Rightward shift of the production possibilities curve, Suppose that an economy is initially operating at a point on its PPC. D. the annual increase in nominal GDP per worker. Policies that encourage savings, and standard of living 's total production with the combined for. Ppc model a point on a fixed production possibilities Frontier can occur to... 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