Multiple Choice
How does a production possibilities frontier (PPF) help illustrate the concept of opportunity cost?
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2. Introductory Economic Models
Production Possibilities Frontier (PPF) - Introduction and Productive Efficiency
Multiple Choice
Which of the following best describes the effect of advances in production technology on a country's Production Possibilities Frontier (PPF)?
A
The PPF shifts inward, showing a decrease in available resources.
B
The PPF becomes a straight line, representing constant opportunity costs.
C
The PPF remains unchanged, as technology does not affect production possibilities.
D
The PPF shifts outward, indicating an increase in productive capacity.
Verified step by step guidance1
Step 1: Understand what a Production Possibilities Frontier (PPF) represents. The PPF shows the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
Step 2: Recognize that advances in production technology improve the efficiency of producing goods, allowing more output from the same amount of resources.
Step 3: Analyze how improved technology affects the PPF. Since more output can be produced, the PPF shifts outward, representing an increase in the economy's productive capacity.
Step 4: Contrast this with other options: an inward shift would indicate fewer resources, a straight line PPF implies constant opportunity costs (not necessarily related to technology), and no change would mean technology has no effect, which is incorrect.
Step 5: Conclude that the best description is that advances in production technology cause the PPF to shift outward, reflecting greater production possibilities.
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