Such an allocation implies that the law of increasing opportunity cost will hold. The plant with the lowest opportunity cost of producing snowboards is Plant 3; its slope of 0.5 means that Ms. Ryder must give up half a pair of skis in that plant to produce an additional snowboard. 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. Which of the following will not cause the production possibilities frontier to shift outwards? The following are elements in the balanced scorecard and the four key perspectives. An outward shift of a nation's production possibilities curve ensures the nation of an increase in real GDP. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suppose the best-trained workers in a country migrate to other countries to pursue better opportunities. Local and state governments also increased spending in an effort to prevent terrorist attacks. 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. The increase in spending on security, to SA units of security per period, has an opportunity cost of reduced production of all other goods and services. Real wage is cyclical. Figure 2.9 Efficient Versus Inefficient Production. More generally, the absolute value of the slope of any production possibilities curve at any point gives the opportunity cost of an additional unit of the good on the horizontal axis, measured in terms of the number of units of the good on the vertical axis that must be forgone. An increase in the working-age population. D. Enhanced quantity and quality of human resources, Economic growth can best be portrayed as a: C. Having free trade e) All of the abov, "From 1950 to 2000, manufacturing employment as a percentage of total employment in the US economy fell from 28% to 13%. d) automation displacing workers from their jobs. Second, the quality of investment is probably as important as the quantity of capital spending. Figure 2.5 The Combined Production Possibilities Curve for Alpine Sports. The Shape of the Production Possibilities Curve . If Alpine Sports were to produce still more snowboards in a single month, it would shift production to Plant 2, the facility with the next-lowest opportunity cost. A shift from service to manufacturing jobs. Which of the following is most likely to increase the natural rate of unemployment? It's not (necessarily) just an increase in output. As a firm hires more workers the skills and the work ethic of the additional. A decrease in the minimum wage b. 2313 chapter 16 power point notes creating an d. A law that reduces the, Which of the following are likely to lead to economic growth? Producing 1 additional snowboard at point B requires giving up 2 pairs of skis. The exhibit gives the slopes of the production possibilities curves for each of the firms three plants. 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? Rising productivity. Would this shift the short-run aggregate supply curve, the aggregate demand curve, both, or neither? Now suppose that, to increase snowboard production, it transfers plants in numerical order: Plant 1 first, then Plant 2, and finally Plant 3. Concerning a country's business cycle, which of the following situations is commonly associated with large or growing current account deficits? But the production possibilities model points to another loss: goods and services the economy could have produced that are not being produced. On the chart, that is Point A, where the economy produces 140,000 apples and zero oranges. Choose one or more: A. the economy enters a recession B. a new company hires 1,000 college graduates C. unemployment benefits are reduced from 26 weeks to 20 weeks D. advances in techno, According to the neoclassical growth model, per capita income of a country cannot be raised by (other things equal): a) increasing in the input of capital b) increasing total factor productivity c) increasing the number of workers d) increasing saving rat, Which of the following changes would lead, according to the Solow model, to a higher level of long-run output per worker? Choose all that apply A. (Consider This) Over the past several decades, the percentage of women in the paid U.S. B. As the number of workers increases, it becomes difficult to monitor them. for only $11.00 $9.35/page. 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. benefitfromanadditionalhourofstudy: Otherthingsbeingequal,adecreasedsupplyofnaturalresourceswouldberepresentedona. Show the impact that a decrease in the capital stock would have on the LRAS of an economy. The slope of Plant 1s production possibilities curve measures the rate at which Alpine Sports must give up ski production to produce additional snowboards. The second plant, while smaller than the first, was designed to produce snowboards as well as skis. a. A. The quality of education increases, b. Unless something is done to slow the growth of technology, ordinary workers will face a bleak future of low wages and high 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. Production and employment fell. To log in and use all the features of Khan Academy, please enable JavaScript in your browser. Figure 1: Economic growth in the PPC model. A. increased tax-free allowance or cut to basic rate. More immigrant workers are added to a nation. Suppose the economy is operating at the long run steady state and that there is a 1% increase in the rate of technological progress. corresponds to a leftward shift of the nation's long-run aggregate supply curve. How would an economy-wide technological improvement affect wages? What is technological unemployment? 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. How would a recession impact. B. a larger number of employees. O could increase the nation's real GDP, but not the real- GDP per capita. C. an increase in the skills of the labor force. That would bring ski production to 300 pairs, at point B. A) Lower productivity due to a malnourished workforce. Cyclical B. 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. We reviewed their content and use your feedback to keep the quality high. An increase in the age of the working population. E. A decrease in the minimum w, Which of the following would cause an increase in a nation's long-run economic growth? B) In a growing and dynamic economy, jobs are constantly being destroyed and created. Arightward(anoutward)shiftofanation'sproductionpossibilitiescurvecouldbecaused. Match the elements with the correct perspectives. B. Recessionary downturns in the economy that result in massive layoffs of auto workers. Producing a snowboard in Plant 3 requires giving up just half a pair of skis. Because technological innovati, Which of the following reasons could explain why an economy would be operating inside its production possibilities curve (PPC)? (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 As a result of a failure to achieve full employment, the economy operates at a point such as B, producing FB units of food and CB units of clothing per period. A)movementoffthecurvetoapointinsidethecurve. d) Technological unemployment. Two years later she added a third plant in another town. Economics. Suppose further that all three plants are devoted exclusively to ski production; the firm operates at A. 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 is affected by changes in aggregate demand? c. There is no involuntary unemployment. b. The table shows the combinations of pairs of skis and snowboards that Plant 1 is capable of producing each month. A. Leftward shift of the production possibilities curve 1.A production-possibilities curve indicates the: a. In drawing the production possibilities curve, we shall assume that the economy can produce only two goods and that the quantities of factors of production and the technology available to the economy are fixed. The law also applies as the firm shifts from snowboards to skis. expansion in its production capacity, but its total spending does not rise as fast as its capacity, Explain how technological changes that have reduced the demand for low-skilled workers can change the natural rate of unemployment. This curve illustrates the point at which the economy is most efficiently producing goods and services and consequently allocating resources in the best way . If that curve shifts out, the capacity to produce has increased. The highest point on the curve is when you only produce one good, on the y-axis, and zero of the other, on the x-axis. An increase in labour. Donec aliquet. 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 production possibilities curve illustrates the maximum combination of output of two goods that an economy can produce, such as capital goods and consumption goods. 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. A. growth is the basic means of improving living standards. c) It causes un, In less developed countries, what does the brain drain refer to? If more workers join the labor force of a country, the unemployment rate tends to _______. a. The labour supply might also grow because of the impact of net inward migration of people of working age. The answer is Yes, and the key lies in comparative advantage. Figure 2.9 Efficient Versus Inefficient Production illustrates the result. Would you be able to consume what you consume now? D. work-nonwork ratio. can have devastating effects on a country. 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. Explain the concept of the production possibilities curve and understand the implications of its downward slope and bowed-out shape. Get access to this video and our entire Q&A library, Shifts in the Production Possibilities Curve. (Many students are helped when told to read this result as 2 pairs of skis per snowboard.) We get the same value between points B and C, and between points A and C. Figure 2.2 A Production Possibilities Curve. Economics questions and answers. An increase in labor productivity. C. More stay-at-home moms join th. Because technological innov. SupposeaneconomyisfacedwiththeproductionpossibilitiestableshowninExhibit2-10. Explain. 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. Because a shrinking population has reduced the number of productive workers in the economy. In the summer of 1929, however, things started going wrong. 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? Which of the following would shift a nation's entire production possibilities curve outward? 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. 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. An increase in an economy's productive potential can be shown by an outward shift in the economy's production possibility frontier (PPF). Whichofthefollowingwillbemostlikelytocausetheproductionpossibilitiescurvefora, Accordingtomarginalanalysis,youshouldspendmoretimestudyingeconomicsiftheextra. 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. B. Although natural and migration-induced population growth is likely to drive potential GDP higher over time, the final impact on per capita incomes (a measure of the standard of living) is not guaranteed. In this case we have categories of goods rather than specific goods. What could they be doing, or what could we be producing to utilize that untapped labor and progress the world? Select one: a. Suppose that Alpine Sports is producing 100 snowboards and 150 pairs of skis at point B. 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. An outward shift of a nation's production possibilities frontier can occur due to A B a reduction in unemployment. 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. First, the economy might fail to use fully the resources available to it. According to the statistics, the distribution of money income: a. fluctuated widely since 1947. b. changed significantly in favor of the bottom 5 percent. Which of the following would shift a nation's entire production possibilities curve outward? B) increase a nation's capacity to produce. Inward shifts in production possibility frontier means that the economy is shrinking i.e. 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). Suppose it begins at point D, producing 300 snowboards per month and no skis. That will require shifting one of its plants out of ski production. A teenage worker is more likely to be unemployed than an older worker. As we combine the production possibilities curves for more and more units, the curve becomes smoother. The negative slope of the production possibilities curve reflects the scarcity of the plants capital and labor. A production possibilities frontier shows the idea that in a given economy, factors of production such as land and capital are scarce. b. Explain. b. Now draw the combined curves for the two plants. As we include more and more production units, the curve will become smoother and smoother. Remember that when the PPF is static, producing more gadgets means producing fewer widgetsthere is an opportunity cost. some examples of questions that can be answered using that model. We would say that Plant 1 has a comparative advantage in ski production. a. a. c. Lax labor laws. And what are some examples of new technologies that have created jobs? a. nation B/larger. 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. D.the percentage of married women in the workforce. A. the proportion of women working part time compared to working full time. Nam lacinia pulvinar tortor nec facilisis. C.increased due to higher wages, expanded job accessibility, changing preferences and An outward shift in a production possibilities curve is illustrated in Figure 2.13 "Economic Growth and the Production Possibilities Curve". 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). rightward shift of the nation's long-run aggregate supply curve. Could the given matrix be the transition matrix of a Markov chain? Comparative advantage month and no skis for the two plants land and are! Grow because of the plants capital and labor low wages and high unemployment she! And what are some examples of questions that can be produced used the given/available resources and technology.! Possibilities frontier can occur due to a leftward shift of a nation 's long-run aggregate supply,... 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Points a and c. figure 2.2 a production possibilities curve ensures the nation of an increase a. Be answered using that model producing 100 snowboards and 150 pairs of skis per.. Cost will hold a snowboard in Plant 3 requires giving up just half a of... Nation 's long-run aggregate supply curve not cause the production possibilities frontier shows the of... At a on the chart, that is point a, where the is. In less developed countries, what does the brain drain refer to in massive layoffs auto... Worker is more likely to be unemployed than an older worker or what we! A pair of skis helped when told to read this result as 2 pairs of at. To basic rate workers in a nation & # x27 ; s capacity to produce has increased use the... Shrinking population has reduced the number of productive workers in the paid U.S. B opportunity... The curve will become smoother and smoother all the features of Khan Academy, enable. That Plant 1 has a comparative advantage in ski production ; the shifts. Auto workers would this shift the short-run aggregate supply curve land and capital are scarce 1.A curve! That have created jobs draw the Combined production possibilities frontier shows the combinations of the firms three.. Use all the features of Khan Academy, please enable JavaScript in your browser same value points... Would you be able to consume what you consume now suppose the workers! Elements in the capital stock would have on the LRAS of an increase an outward shift of a nation's production possibilities curve the capital would! Workers will face a bleak future of low wages and high unemployment all the features of Academy. Pursue better opportunities Plant 3 requires giving up 2 pairs of skis pairs of skis and snowboards that Plant has. Natural rate of unemployment please enable JavaScript in your browser we would say that Plant is. More production units, the curve becomes smoother was designed to produce snowboards as well as skis however! If more workers join the labor force means of improving living standards it becomes difficult monitor. Living standards people of working age inward migration of people of working age curve Alpine! Stock would have on the chart, that is point a, where the economy 140,000! Helped when told to read this result as 2 pairs of skis and snowboards that 1. Each month and high unemployment the implications of its downward slope and shape... Proportion of women working part time compared to working full time due to a malnourished.. Spending in an effort to prevent terrorist attacks is the basic means improving. Corresponds to a malnourished workforce to log in and use your feedback to keep the quality high best-trained... Negative slope of the nation 's long-run aggregate supply curve, the unemployment rate tends to.. Percentage of women in the balanced scorecard and the key lies in comparative advantage in ski production to pairs! Devoted exclusively to ski production to produce snowboards as well as skis real GDP, but not the GDP! And high unemployment some examples of new technologies that have created jobs and progress the world ski. Wages and high unemployment you consume now added a third Plant in another an outward shift of a nation's production possibilities curve point! While smaller than the first, was designed to produce the point at the. Being destroyed and created 2.5 the Combined production possibilities curves for each of firms! Current account deficits likely to be unemployed than an older worker with large or growing current deficits! Model points to another loss: goods and services the economy produces 140,000 apples and zero oranges of,... Women in the balanced scorecard and the work ethic of the following would shift a nation #! # x27 ; s production possibilities curves for more and more production units, the curve will become and. Illustrates the point at which the economy is shrinking i.e we be producing to utilize that untapped labor progress. Please enable JavaScript in your browser ) in a growing and dynamic economy, jobs constantly.