Answered: Classify each of the following as a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Classify each of the following as a movement along or a shift of the production function and provide a justification for your choice.

(1)An increase in the number of machines used in production

(2) An increase in the population growth rate

(3) A new technological innovation

Expert Solution

Step 1

Each of the given movements has an impact on shifting production possibilities frontier.

Step 2

An increase in the number of machines used in production:

If there is an increase in the number of machinery used in production, then the production will be higher than the previous. Thus, the production possibility curve (PPF) will shift upward (from PPF AB to PPF CD).

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