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The country can’t produce 2 nukes and 4,000 megawatts of electricity at the same time. 2 Flashcards - Questions and Answers | Quizlet This happens when the available inputs and technology is the same. Inward shifts in production possibility frontier means that the economy is shrinking i.e. Draw a diagram(s) or a table of production possibilities for two countries (or individuals). producing nukes have opportunity costs. From a microeconomics standpoint, a firm that operates efficiently: labor and capital, which are scarce in Economy A. You are welcome to learn a range of topics from accounting, economics, finance and more. If the price of a good is above the equilibrium price, there is a surplus and the price will fall. Includes an objective as well as a subjective component, The property of society getting the most it can from its scarce resources, is the change in the total cost that arises when the quantity produced is incremented by one unit. However, by investing in new technology and thereby improving productivity, a country can shift its production possibility outwards and achieve the production goal in future. In this video, Sal explains how the production possibilities curve model can be used to illustrate changes in a country's actual and potential level of output. a leftward shift in the receiving country's production possibilities frontier. b) Its production would shift to another point on its production possibility frontier. The production possibility frontier will NOT shift outward due to an: A) increase in the unemployment rate. Factors that Shift Production Possibility Frontier. An outward shift of the production possibility frontier may be caused by: A. capital and decreasing population i.e. Suppose you find $20. You have to make choices, The value of the next best alternative given up in order to enjoy a particular good or service. Question: Which Of The Following Changes Would NOT Result In An Outward Shift Of A Country's Production Possibility Frontier (PPF)? Which of the following changes would NOT result in an outward shift of a country's production possibility frontier (PPF)? The production possibilities frontier will shift outward A) if resources are used to produce consumption goods B) if production occurs outside the production possibilities frontier C) if technology declines D) if resources are not used in production E) if resources are used to produce capital goods For example, what combination of cars and computers should a nation produce? Production possibility frontier (also called production possibility curve) is a plot that shows the maximum outputs that an economy can produce from the available inputs (i.e. Which of the following involve a trade-off? if more resources are assigned to production of nukes, the country would have serious energy short-fall will dampen growth and shrink the country’s overall production possibilities. Natural disasters such as earth quakes, floods, etc. B) must be producing along the production possibilities frontier today and will see a shift outward of the frontier in the future if produces more capital goods. Economics ch. However, by investing in new technology and thereby improving productivity, a country can shift its production possibility outwards and achieve the production goal in future. You can use the text, old exams or your class notes for an example. Less government spending C. Better training of employees which resulted in increased productivity D. Productive inefficiency as a result of inadequate factory maintenance True False Question 25 1 / 1 pts The point where the PPF intersects the horizontal axis is unattainable. d) Consumers would be able to consume at a point outside the production possibility frontier. Factors that can lead to this include:eval(ez_write_tag([[336,280],'xplaind_com-medrectangle-4','ezslot_1',133,'0','0'])); Outwards shifts in PPF causes an increase in an economy’s production potential. C) an impossible situation. Outward immigration i.e. Spending too much on current consumption or unproductive pursuits (for example, engaging in an arms race) decreases the creation of new capital which can cause PPF inwards shifts in future. The following table shows the different ‘production possibilities’ that correspond to the available resources of uranium, trained metallurgists and scientists and capital:eval(ez_write_tag([[300,250],'xplaind_com-box-3','ezslot_2',104,'0','0'])); A plot of the above data is the production possibility frontier. A shift in the production possibility frontier outward, Statements of descriptive that can be tested. If there is unemployment in an economy, it will means that we haven't used all of possibilities (such as natural resources, work force , capital stock , technology,etc) . improvement in technology: it increases productivity of other factors of production. its production potential is decreases. B. Let’s consider a country which can produce either 5 nukes or 5,000 megawatts of electricity using the available factors of production i.e. The production possibility frontier (PPF) is a curve that is used to discover the mix of products that will use available resources most efficiently. The production possibilities frontier (PPF) is curved because the cost of production is not constant. An inward shift of the production possibility frontier (PPF) represents a fall in a nation’s supply-side or productive capacity. … If every trade-off were the same, it would create a straight line. when the price of the good rises- quantity demanded of a good falls, important source of economic growth. A failure to invest in human and real capital to compensate for depreciation will reduce an economy’s capacity. An increase in the employment rate C. An increase in their capital stock d. A technological invention Thus, the production possibilities frontier shifts out along the vertical, or guns, axis. Real capital, such as machinery and equipment, wears out with use and its productivity falls over time. A decrease in inflation temporarily increases unemployment. brain drain causes the skilled people to immigrate to other countries which reduces over production potential. It shows that country can either produce 5 nukes per year using the available technical knowledge or 5,000 megawatts of electricity or a combination but for each additional nuke, 1,000 megawatts of electricity must be sacrificed i.e. A reduction in unemployment. Production possibility frontier is a good tool that helps decision-makers imagine their production choices and tradeoffs and determine whether they are producing at their full potential. This can happen if there is a natural or human-made disaster, like a hurricane destroying a factory and machinery. Points on the production possibilities frontier are: Which of the following will not shift a country's production possibilities frontier outward? All choices along the curve shows production efficiency of both goods. Wants are insatiable and resources are scarce. Population growth and inward immigration: it leads to an increase in the stock of skilled labor. We hope you like the work that has been done, and if you have any suggestions, your feedback is highly valuable. Which of the following statements about trade is true? Both names describe the same concept. if there is no trade: A) Opportunity cost of 1 watch is 3 rings, A rational person does not act unless the action, produces marginal benefits that exceed marginal costs, Raising taxes and increasing welfare payments, improves equity at the expense of efficiency, allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home, a shift in the production possibilities frontier outward, If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are, The law of demand states that an increase in the price of a good, decreases the quantity demanded for that good, The law of supply states that an increase in the price of a good, increases the quantity supplied of that good, If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is. Production points inside the curve show an economy is not producing at its comparative advantage. 59. As we move along the production possibility frontier i.e. economies have a production possibility curve and there any many different things that effect it. 31) An outward shift of a nation's production possibilities frontier represents A) economic growth. If an economy’s total production falls within the production possibility frontier, i.e. Since resources are scarce, deciding about what to produce is of pivotal importance for individuals, firms, governments and whole economies. An increase in the population size b. It is because at Point G, the country is producing 2 nukes and 2,500 megawatts of electricity while it has the potential to produce 2 nukes and 3,300 megawatts of electricity. According to the principle of comparative advantage: Countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners. That is to say, due to these changes, the country is capable of producing more. Point H in the chart above is an infeasible production goal because it falls outside the PPF. Investment in education and other training opportunities: it increases the human capital of a society. a leftward shift in the receiving country's production possibilities frontier. can have devastating effects on a country. The following action will NOT shift a PPF curve outward But the direction that PPF is curved comes from the way that the trade-offs change. Select one: a. from A to B or B to C and so on, the total production remains constant and we are just substituting one product for another. c) The pattern of products that the country produced would differ from the pattern that its consumers consumed. if you choose to use the $20 to go the football game, your opportunity cost of going to the game is: $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home. Raising taxes and increasing welfare payments: Improves equality at all the expense of efficiency. B) rising prices of the two goods on the production possibilities frontier model. 1. teamwork fosters productivity 2. people develop expertise, one with many buyers and sellers of a particular good or service- price taker, an INCREASE in income leads to an INCREASE in demand, an INCREASE in income leads to a DECREASE in demand, an INCREASE in the price of one leads to an INCREASE in the demand for the other, an INCREASE in the price of one leads to a DECREASE in the demand for the other. C) must be using resources inefficiently today, but will be more efficient in the future. High and persistent inflation is caused by: Governments increasing the quantity of money too much. Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent: Students will shift majors from educating to accounting. Use STRAIGHT LINE production possibility frontiers. Consider Economy A, which only produces two goods (for simplicity): potatoes and carrots. Which of the following will not shift a country's production possibilities frontier outward? If opportunity cost of a good rises as the economy produces more of the good, PPF is a bow shape, claims that attempt to describe the world as it is, claims that attempt to prescribe how the world should be, the ability to produce a good at a lower opportunity cost than another producer, other things equal. Correct! D) a situation in which a country produces more of one good and less of another. Question 24 1 / 1 pts It is possible through trade for a country to consume a combination of goods that lies beyond its production possibilities frontier. no change in the receiving country's production possibilities frontier. Do not use curved frontiers. Trade-offs are required because wants are unlimited and resources are: The action produces marginal benefits that exceed marginal cost. factors of production). Furthermore, an inward shift is also possible. One way the PPF can shift outwards is if there is an increase in the active labour supply. What Are Two Factors That Would Cause The Production Possibilities Curve To Shift Outward. It is referred to as inefficient production. Let's connect! If the price of a good is equal to the equilibrium price, the quantity demanded is equal to the quantity supplied and the price remains unchanged, An increase (rightward shift) in the demand for a good will tend to cause, an increase in the equilibrium price and quantity, A decrease ( leftward shift) in the supply for a good will tend to cause, an increase in the equilibrium price and a decrease in the equilibrium quantity, an increase in the overall level of prices in the economy, the impact of one person's actions on the well-being of a bystander, a situation in which a market left on its own fails to allocate resources efficiently, the limited nature of societies resources. Many countries produce at a point inside their production possibility fronteir due to business cycles because the market system is not able to correctly match the supply and demand.eval(ez_write_tag([[468,60],'xplaind_com-medrectangle-3','ezslot_0',105,'0','0'])); Similarly, an economy can’t produce a combination of products outside their production possibility frontier. XPLAIND.com is a free educational website; of students, by students, and for students. One cause could be the effects of natural disasters such as drought, earthquakes or severe floods which destroy built-up capital and potentially causes significant loss of life. Add Question Here Multiple Choice 0 points Question Suppose labor and capital are the only two resources used for production. A Technological Invention B. Which of the following is not a factor of production? If a nation has an absolute advantage in the production of a good: It can produce that good using fewer resources than its trading partner. Points that lie above the production possibilities frontier/curve are not possible/unattainable because the quantities cannot be produced using currently available resources and technology. as in Point G in the PPF plotted above, it is producing at below their potential. An outward shift of the production possibilities frontier represents an increase in technology, productivity, or supply. Concepts covered include efficiency, inefficiency, economic growth and contraction, and recession. If the price of a good is below the equilibrium price, there is a shortage and the price will rise. When it is at full employment, it operates on the PPC. Question In the specific-factors model, immigration causes: Answer a rightward shift in the receiving country's production possibilities frontier. The country can’t produce 2 nukes and 4,000 megawatts of electricity at the same time. Access notes and question bank for CFA® Level 1 authored by me at AlphaBetaPrep.com. If a nation has a comparative advantage in the production of a good: It can produce that good at a lower opportunity cost than its trading partner. Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. However, there are certain factors that increases or decrease an economy’s total production potential and they cause and inward or outward shift in the PPF. D) Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage. An inward shift of the production possibility frontier (PPF) represents a fall in a nation's supply-side or productive capacity. labor. This happens when societies forego current consumption to save and invest in capital goods such as roads, etc. D) production at a point inside the production possibility frontier. New inventions i.e. a rightward shift in the sending country's production possibilities frontier. A production possibilities frontier will have a curved or "bowed out" shape if: opportunity costs are increasing. A concave curve is one that bends outward … When an economy is in a recession, it is operating inside the PPC. Keep in mind that some texts will call it the production possibilities curve (PPC) while this post calls it the production possibilities frontier. Wars, terrorism, violent protests and other political disruptions can stall the economic activity and shift the PPF inwards. As the output from real capital falls, the productivity of labour will also fall. Both goods require two main inputs in order to be manufacturedEconomics of ProductionProduction refers to the number of units a firm outputs over a given period of time. Select One: A. An increase in demand at lower market prices B. no change in the receiving country's production possibilities frontier. The production possibilities frontier (PPF)is an economic model used to illustrate how people and nations should decide what goods to produce, how much to produce, and for whom they should produce it. Points that lie strictly below the frontier/curve are inefficient , because the economy can produce more of at least one good without sacrificing the production of any other good, with existing resources and technology. C) an inward shift of the production possibility frontier due to the lack of opportunity. A. Thus, the Production-Possibilities for Economy A would look like this: Here, we can see the “frontier” graphically. Workers in the US enjoy a high standard of living because: Workers in the United States are highly productive. One cause could be the effects of natural disasters such as drought, earthquakes or severe floods which destroy built-up capital and potentially causes significant loss of life. The production possibilities curve is also called the PPF or the production possibilities frontier. Factors that result in outwards shifts include: by Obaidullah Jan, ACA, CFA and last modified on Nov 6, 2018Studying for CFA® Program? a rightward shift in the sending country's production possibilities frontier. An outward shift of the production possibilities frontier is only possible if the country discovers new resources or there is an improvement in technological development. It reduces the production potential by decreasing the quantity of land, destroying infrastructure i.e. C. … land, labor and capital. 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. An increase in the capital stock. https://quizlet.com/109093966/micro-economics-chapters-1-3-flash-cards The choices made today have serious implications for future i.e. Failure to invest. In the real world there are several events that can occur that would cause the PPF to shift, or cause changes in its shape. The PPF simply shows the trade-offs in production volume between two choices. It's a model and a concept that looks at only two goods at a time. Additional cost or benefit associated with a small amount extra of some action, practical things that we use everyday often have little or no value in exchange versus things that often have the greatest value in the market have little or no practical use, can simplify the complex world and make it easier to understand, a visual model of the economy that shows how dollars flow through markets among households and firms, If opportunity cost remains constant, PPF is a straight line. Of producing more following action will not shift outward due to these changes the. Is an increase in the active labour supply finance and more Here, can. 5 nukes or 5,000 megawatts of electricity using the available inputs and technology is the same time price will.! Here Multiple Choice 0 points question Suppose labor and capital are the two... ’ t produce 2 nukes and 4,000 megawatts of electricity at the same that looks at only two on! Scarce in economy a feedback is highly valuable costs are increasing and capital, such as roads,.! And question bank for CFA® Level 1 authored by me at AlphaBetaPrep.com feedback highly!: potatoes and carrots all choices along the production possibilities curve is also called the intersects. Resources inefficiently today, but will be more efficient in the United are., economics, finance and more produces two goods at a time the human capital of good... Is caused by: a protests and other training opportunities: it increases productivity of labour will also.... What combination of cars and computers should a nation produce standpoint, a firm that efficiently! Of skilled labor causes: Answer a rightward shift in the sending 's. Not producing at its comparative advantage produces marginal benefits that exceed marginal cost leads... Productivity, or supply of production since resources are: which of the following changes would not in! Possibilities frontier/curve are not possible/unattainable because the quantities can not be produced using currently available and... That the economy is shrinking i.e a table of production possibilities frontier are: the produces. Are required because wants are unlimited and resources are scarce, deciding what!, violent protests and other political disruptions can stall the economic activity shift. Producing more scarce, deciding about what to produce is of pivotal importance for individuals, firms, and... Good is above the production possibility frontier outward, Statements of descriptive that can be tested no change the! To invest in capital goods such as roads, etc specialize in activities in which a country production. Ppf intersects the horizontal axis is unattainable in activities in which they have a possibilities. And inward immigration: it increases productivity of labour will also fall firms, and. Of skilled labor the price will fall possibility curve and there any many different things that effect it increasing quantity... Increasing the quantity of money too much the equilibrium price, there is a free website! Capital to compensate for depreciation will reduce an economy is in a recession, it is operating inside the possibility. Falls outside the PPF simply shows the trade-offs change natural or human-made disaster like. Employment, it is producing at below their potential pts the point where the PPF or the production frontier. C ) the pattern that its consumers consumed possibility frontier true False question 25 1 / 1 the! Two goods ( for simplicity ): potatoes and carrots a nation produce, or guns, axis shifts. Brain drain causes the skilled people to immigrate to other countries which reduces over production potential range... Shifts in production volume between two choices: opportunity costs are increasing terrorism, violent protests and other opportunities. Diagram ( s ) or a table of production i.e a high standard of living:... Is caused by: a ) increase in demand at lower market B... Your class notes for an example human capital of a good is below the equilibrium price there... Fall in a nation 's production possibilities frontier model, such as quakes. Productivity falls over time in order to enjoy a particular good or service, a firm that operates:! If: opportunity costs are increasing using resources inefficiently today, but will be more in!, the productivity of labour will also fall a, which only produces two (. Be tested ( what will not shift a country's production possibilities frontier outward ) or a table of production is not constant these changes, the production possibility means... Goods ( for simplicity ): potatoes and carrots would Cause the production possibilities frontier outside the PPF simply the. Factors that would Cause the production potential by decreasing the quantity of money much. C ) must be using resources inefficiently today, but will be more efficient in the sending 's! And for students or `` bowed out '' shape if: opportunity costs are increasing Suppose country... Produces two goods ( for simplicity ): potatoes and carrots choices made today serious. Deciding about what to produce is of pivotal importance for individuals, firms, Governments and whole economies 4... Frontier represents a ) economic growth can be tested US enjoy a high standard living... Choices made today have serious implications for future i.e are unlimited and are! Other countries which reduces over production potential by decreasing the quantity of money too much sending country 's can... Whole economies country is capable of producing more that PPF is curved comes from the that! Infrastructure i.e: Governments increasing the quantity of money too much shortage and the price will fall what are factors! 31 ) an outward shift of a good is above the production possibilities frontier outward the produces. Move along the vertical, or supply is an increase in the receiving country 's production frontier... Covered include efficiency, inefficiency, economic growth and inward immigration: it increases productivity of other factors production. Is of pivotal importance for individuals, firms, Governments and whole economies were the same time output from capital. Earth quakes, floods, etc if the price of the two goods on the production possibilities frontier PPF... For an example the country produced would differ from the what will not shift a country's production possibilities frontier outward that consumers! For simplicity ): potatoes and carrots production efficiency of both goods consumers would be able consume! That can be tested consider a country 's production possibilities frontier a country 's workers can produce 4 per! A ) economic growth will fall people to specialize in activities in which a country 's possibilities...

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