The graph below shows the short-run production possibilities frontier for a hypothetical country whose currency is the U.S. dollar. This country chooses to produce the mix of capital and consumer goods indicated by point A. This leads to a long-run expansion of the production possibilities frontier, with a 20% increase in production capacity for both consumer and capital goods. Use the curved-line tool to draw the new production possibilities frontier. Point A happens to coincide with the middle control point of the short-term curve; use that to help you decide where the curved-line tool's middle control point of the long-term curve should go (do not use the point tool to plot a point).
The graph below shows the short-run
Use the curved-line tool to draw the new production possibilities frontier. Point A happens to coincide with the middle control point of the short-term curve; use that to help you decide where the curved-line tool's middle control point of the long-term curve should go (do not use the point tool to plot a point).
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