Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 3, Problem 10P
To determine
Amongst the given economies, the economy that will grow rapidly.
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Economy A produces more capital goods and fewer consumers goods than economy B. Which economy will grow more rapidly? Draw two production possibilities curves, one for Economy A and one for Economy B. Demonstrate graphically how one can grow more rapidly than the other.
Using a simple model of the Production Possibilities Curve (PPC), label points that show inefficient, and efficient, unattainable production. What are the major assumptions of the underlying the model?b. Use a second model to illustrate the difference between economic expansion and economic growth.
Graphically explain how each of the following events affects the location of a
country's production possibilities curve:
i. The quality of education increases.
ii. The number of unemployed workers increases.
iii. A new technique improves the efficiency of extracting copper from ore.
iv. A devastating earthquake destroys numerous production facilities.
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- Which of the following are made constant when applying the production possibilities curve theory? Select one: a. Trading rate between goods b. Total exports and imports c. Total number of factors of productions d. International pricingarrow_forwardConsider the graph. What will happen if technological development raises the maximum amount of goods that can be produced by the economy? a. A movement along the production possibilities curve towards the horizontal axis. b. An outward rotation of the production possibilities curve at its intersection with the vertical axis. c. An outward rotation of the production possibilities curve at its intersection with the horizontal axis. d. An outward shift of the production possibilities curve.arrow_forwardRefer to Figure 2-3. This economy has the ability to produce at which point(s)?arrow_forward
- Consider a simple economy whose only industry is fishing. In this industry, productivity-the amount of goods and services a worker can produce per hour-is measured by the number of fish one fisherman catches per hour. In the following table, match each example to the productivity determinant it represents. Natural Resources Technological Knowledge Human Capital Physical Capital Examples per Worker per Worker per Worker A route fishing boats can follow to maximize their catch at different points in the day The skills workers develop through training before working on and piloting boats The boats in the fishing fleet The fertile waters in which the fish feed and breedarrow_forwardUsing this table, draw a production possibilities curve. What assumptions is this production possibilities curve based?arrow_forwardAssume that a country with a market economy produces capital goods and consumer goods, use the data that follows to answer the question that follows: Capital Goods Consumer Goods 50 0 40 20 30 35 20 45 10 50 0 51 Does the “law” of increasing opportunity cost apply in the…arrow_forward
- The following graph shows a production possibilities curve for a hypothetical country. Suppose that due to an increase in human capital, a country experiences economic growth. Adjust the following graph to show the effect of advances in human capital on the economy's production possibilities curve. Consumption goods PPC Capital goods 6 PPCarrow_forwardThe attainable production points on a production possibilities curve are?arrow_forwardWhen economic growth occurs, the production possibilities frontier shifts outward but no longer limits the amount that can be produced. economy moves along its production possibilities frontier. production possibilities frontier shifts outward. production possibilities frontier becomes steeper.arrow_forward
- Explain how (if at all) each of the following events affects the location of a country’s production possibilities curve:a. The quality of education increases.b. The number of unemployed workers increases.c. A new technique improves the effifi ciency of extracting copper from ore.d. A devastating earthquake destroys numerous production facilities.arrow_forwardHow can an economy increase the production of one good without reducing the production of another? Identify at least three factors that contribute to this increase and explain how they contribute to the increase.arrow_forwardAn economy consists of three workers: Larry, Moe, and Curly. Each works ten hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or wash one car. Calculate how much of each service is produced under the following circumstances, which we label A, B, C, and D: All three spend a their time mowing lawns (A) All three spend all their time washing cars (B) All three spend half their time on each activity (C) Larry spends half his time on each activity, while Moe only washes cars and Curly only mows lawns (D) Sketch a production possibilities frontier for points A, B, C, and D and explain why the production possibilities frontier has the shape it does. Are any of the allocations calculated in part (a) inefficient? Explain.arrow_forward
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