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When a nation’s economy grows:?

When an economy grows its production possibilities frontier?

If an economy is producing at a point on its production possibilities frontier, it is: efficient in production but not necessarily in allocation. not necessarily efficient in production or allocation.

What are the two major ways in which an economy can grow?

What are the two major ways in which an economy can grow and push out its production possibilities curve? Increases in resource supplies and advances in technology.

What shifts the PPF?

Outward or inward shifts in the PPF can be driven by changes in the total amount of available production factors or by advancements in technology. If the total amount of production factors like labor or capital increases, then the economy is able to produce more goods at any point along the frontier.

Why is PPC a curve?

The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. The bowed out shape of the PPC in Figure 1 indicates that there are increasing opportunity costs of production.

How does a PPC show economic growth?

Economic growth in the production possibilities curve (PPC) model. The production possibilities curve illustrates the maximum combination of output of two goods that an economy can produce, such as capital goods and consumption goods. If that curve shifts out, the capacity to produce has increased.

Why is it inefficient for an economy to be inside the production possibilities frontier?

All choices on the PPF in this graph, including A, B, C, D, and F, display productive efficiency. However, any choice inside the production possibilities frontier is productively inefficient and wasteful because it is possible to produce more of one good, the other good, or some combination of both goods.

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What are the four main ways to push out the PPC or grow the economy?

What are the four ways to “push out the PPC” to the right or “grow” the economy?



  • Using new and improved technology.
  • Expand the four economic resources.
  • International trade to obtain the four resources.
  • Present Choices and Future Possibilities.

How is opportunity cost calculated?

The formula for calculating an opportunity cost is simply the difference between the expected returns of each option. Say that you have option A: to invest in the stock market hoping to generate capital gain returns.

What is the opportunity cost of moving from point C to D?

The opportunity cost of moving from point C to D is 40 tons of oranges. The per-unit opportunity cost of moving from point C to point D is 1/2 ton of oranges (40 tons of oranges/80 tons of pears). Economic growth is shown by a shift to the right of the production possibilities curve.

Can a PPF ever shrink inwards?

Can a production possibility frontier ever shrink inwards? Explain your reasoning: Yes, if new regulations restrict a country’s capacity to produce goods. If there is a deficiency let’s say there a lack of resources or lack of works to perform that job it can result with the frontier shrinking inward.

Can PPF shift explain with diagram?

Given the fact that resources are scarce, we have constraints, which is what the curve shows us. When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right.

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What causes PPF to shift right?

Shifts in the PPF Curve



The basic idea is that anything that causes economic output to increase or decrease will shift this curve. When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right.

Why is PPF curved and not straight?

The PPF curve illustrates opportunity cost. If the American economy shifted its resources from domestic goods to military expenditures, this is sometimes done plotting “guns” on one axis and “butter” on the other, as two outputs. This specialization gives the PPF curve an outward bowed curve.

What does a convex PPC mean?

The shape of a production possibility curve (PPC) reveals important information about the opportunity cost involved in producing two goods. When the PPC is convex (bowed in), opportunity costs are decreasing.

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