Chapter 40, Problem 1MCQ

To determine

The correct reason for the shift of the production possibility curve outward.

Answer to Problem 1MCQ

Option a is correct.

Explanation of Solution

Explanation for the correct option:

a.

Technology changes can shift the production possibility outward because that would increase the output level of the overall production of goods and services.

Explanation for incorrect options:

b.

An increase in the production of consumer goods can decrease the production of other alternative types of goods produced using similar resources but would not shift the possibility curve outward.

c.

A decrease in labor resources would require using the labor resources for limited production. This would also not shift the PPC outward.

d.

Depreciation of capital will affect production due to a reduction in its efficiency for being long −term usage. For instance, a machine is depreciated and its production is reduced to a certain level.

e.

Since only one option is correct. Therefore, option e is incorrect.

Economics Concept Introduction

Production possibility curve (PPC): PPC shows the graphical representation of a different combination of goods that can be produced by using the available factor of production.