28. Which of the following correctly describes the relationship between producti
ID: 1141390 • Letter: 2
Question
28.
Which of the following correctly describes the relationship between productivity growth, unemployment, and the economy's production possibilities frontier?
A.
An increase in productivity moves the economy from inside the production possibilities set to its frontier.
B.
An increase in unemployment shifts the economy from a point outside the production set back to the production possibilities frontier.
C.
A reduction in unemployment shifts the entire production possibilities frontier outward.
D.
An increase in unemployment shifts the economy further inside its production possibilities set.
E.
An increase in productivity shifts the economy from the production possibilities frontier to a point outside the production possibilities set.
The figure shows the market for game day
tminusshirts.
If the price of
tminusshirts
is $12, then
A.
the market is in equilibrium.
B.
there is a surplus and the price of
tminusshirts
will rise.
C.
there is a shortage and the price of
tminusshirts
will fall.
D.
there is a surplus and the price of
tminusshirts
will fall.
E.
there is a shortage and the price of
tminusshirts
will rise.
Suppose India and France start off on
PPF0 ,
but at different production points, shown in the figure.
Based on their current production points, relative to France, which is India's most likely future
PPF ?
A.
PPF0
with France on
PPF1.
B.
PPF2
with France on
PPF1.
C.
PPF1
with France on
PPF2.
D.
PPF1
with France on
PPF1
.
E.
None of the above because economic growth will not happen in India.
8. Wine (thousands of bottles per year) 12 3 6925 Rice (tons per year) The figure shows the production possibility frontier for a country. Suppose the country is producing point E. What would be the opportunity cost to increase the production of wine to 9 thousand bottles? A. 9 thousand bottles of wine B. Nothing, it is a free lunch c.Explanation / Answer
Question 28
Relation between productivity growth and production possibilities frontier -
Productivity growth increases the production potential of an economy which in result shifts the entire production possibilities frontier outward as economy, now, can produce more with same set of resources due to productivity growth.
Relation between unemployment and production possibilities frontier -
Increase in unemployment results in the lack of utilization of resources such as labor which in result push the economy further inside its production possibilities frontier.
So,
The correct statement is that an increase in the unemployment shifts the economy further inside its production possibilities set.
Hence, the correct answer is the option (D).
Question 8
Currently, country is producing at point E, where it is producing 15 tons of rice per year and 0 bottles of wine.
Now, country started producing 9 thousand bottles of wine. In this scenario, given the resources of country, it can produce only 12 tons of rice peyear.
So, Country has to sacrifice 3 tons of rice in order to produce 9,000 bottles of wine.
Sacrifice indicates opportunity cost.
Thus,
The opportunity cost to increase the production of wine to 9 thousand bottles is 3 tons of rice.
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