An economy can produce various combinations of food and shelter along a production possibilities curve (PPC). Suppose a technological innovation resulted in a new, higher-yielding crop that generated more bushels of grain for a given set of land, labor, and capital resources. If this innovation did not affect the productivity of shelter production, which of the following would be true?
a. The PPC will shift outward equally along both axes of the graph.
b. The PPC will rotate inward along the food axis, but will not shift on the shelter axis.
c. The PPC will rotate outward along the food axis, but will not shift on the shelter axis.
d. The PPC will not change.
Production Possibilities Curve:
The Production Possibilities Curve is a curve that shows the combinations of two goods that can be produced given the current level of resources. The curve is made based on the assumption that the economy is working with no wastage.
Answer and Explanation: 1
- The correct option is c. The PPC will rotate outward along the food axis, but will not shift on the shelter axis.
Here, the productivity of...
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fromChapter 1 / Lesson 5
Learn about the production possibilities frontier (PPF). See what the PPF graph represents and what causes the ppc curve to shift outward.