Macroeconomics
Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
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Chapter 2, Problem 1QE
To determine

The shift of the production possibility curve.

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Explanation of Solution

The figure shows the production possibility curve.

Macroeconomics, Chapter 2, Problem 1QE

In the figure, the horizontal axis represents the production of widgets and the vertical axis represents production of wadgets. As a result of an increase in the production of widgets, the point that touches the X-axis will move rightward. If the production of wadgets decreases, the point that touches the Y-axis moves downward. This will create a new production possibility curve.

Economics Concept Introduction

Production possibility curve: Production possibility curve refers to the different combinations of two commodities that can be produced using the available resources and technologies fully and efficiently.

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Students have asked these similar questions
Imagine two societies A and B with the production possibility curve shown in the diagram. In year t Society A produces only capital goods and Society B only butter In year t + 1 they both produce only butter. Which of the following describes both societies in year t + 1? A) A has a larger capital stock and A produces more butter. B) Both have the same capital stock but A produces more butter. C) Both have the same capital stock and both produce the same amount of butter. D) A has a larger capital stock but B produces more butter.
How could a country shift its production possibilities curve to the right through improved technology?
Under what circumstances in the Philippines can we operate outside the production possibilities curve? Explain your answer.
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