Suppose that in Fig 2-24, the nation with other wise the same background conditions as in Problem 2-23 currently has sufficient resources to produce combinations located along only the innermost production possibilities curve. If the nation produces no additional smartphones this year, will the intermediate-shifted PPC resulting from minimal economic growth or the farthest shifted PPC caused by more significant economic growth be more likely to apply next year?

Short Answer

Expert verified

Yes.

Step by step solution

01

Step1. Given information

Given it is that the nation does not have enough resources and can only produce at the inner, inferior combinations of the PPC curve.

02

Step2. Explanation

The growth of any country is linked to the production of capital goods primarily. If a country is able to produce more, that is because the support of the production of capital goods exist. But, here since the question says there is no production of capital goods, there might not be any expansion of production. So, there is no shift in PPC/PPF. This also means there are no consumption goods being produced. But since we said, there might be no production of capital goods, the chances of production of capital goods might still exist. There hence as a result of this, there might be a shift in the PPC outwards, indicating growth.

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Most popular questions from this chapter

In spite of the lower opportunity cost of rail-gun projectiles instead of missiles, does the U.S. Navy continue to face an increasing additional cost, in terms of forgone ship production, to obtain additional weapons? Explain briefly.

During a debate on the floor of the U.S. Senate, Senator Creighton states, “Our nation should not devote so many of its fully employed resources to producing capital goods because we already are not producing enough consumption goods for our citizens.” Compared with the other labeled points on the diagram, which one could be consistent with the current product combination choice that Senator Creighton believes the nation has made?

A nation’s residents can allocate their scarce resources either to producing consumer goods or to producing human capital—that is, providing themselves with training and education. The following table displays the production possibilities for this nation:

Production CombinationUnits of Consumer GoodsUnits of Human Capital
A0100
B1097
C2090
D3075
E4055
F5030
G600

(a) Suppose that the nation’s residents currently produce combination A. What is the opportunity cost of increasing the production of consumption goods by 10 units? By 60 units?

(b) Does the law of increasing additional costs hold true for this nation? Why or why not?

In response to Senator Creighton’s statement reported in Problem 2-10, Senator Long replies, “We must remain at our current production combination if we want to be able to produce more consumption goods in the future.” Of the labeled points on the diagram, which one could depict the future production combination Senator Long has in mind?

Consider a change in the table in Problems 2-6. The student’s set of opportunities is now as follows: Does the PPC illustrate the law of increasing additional cost? What is the opportunity cost to this student for the additional amount of study time on economics required to move her grade from 60 to 70? From 90 to 100?

EconomicsBiology
10040
9050
8060
7070
6080
5090
40100
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