(Production Possibilities) Under what conditions would an economy be operating i
ID: 1251327 • Letter: #
Question
(Production Possibilities) Under what conditions would an economy be operating inside its PPF? On its PPF? Outside its PPF?(Shifting Production Possibilities) Determine whether each of the following would cause the economy’s PPF to shift inward, outward, or not at all:
a. An increase in average length of annual vacations
b. An increase in immigration
c. A decrease in the average retirement age
d. The migration of skilled workers to other countries
(Income Effects) When moving along the demand curve, income must be assumed constant. Yet one factor that can cause a change in the quantity demanded is the “income
effect.” Reconcile these seemingly contradictory facts.
(Market Equilibrium) Determine whether each of the following statements is true, false, or uncertain. Then briefly explain each answer.
a. In equilibrium, all sellers can find buyers.
b. In equilibrium, there is no pressure on the market to produce or consume more than is being sold.
c. At prices above equilibrium, the quantity exchanged
exceeds the quantity demanded.
d. At prices below equilibrium, the quantity exchanged
is equal to the quantity supplied.
Explanation / Answer
An economy would be operating inside its PPF if a society volunteers to not produce as much as it possibly can, for whatever reason. It would be on its PPF if a society wants to produce as much as it can. It can NEVER be outside its PPF. a. inward b. outward c. inward d. inward As income increases, so does the quantity of goods and services demanded. If a nation's income increases, the entire demand curve shifts right. When moving along a demand curve, income is assumed constant. However, when income increases, you don't move along a demand curve, you create a new demand curve further outward. a. true b. true c. false d. true
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