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Chapter 2: Q 9 (page 46)

Construct a production possibilities curve for a nation facing increasing opportunity costs for producing food and video games. Show how the PPC

changes have given the following events.

(a) A new and better fertilizer is invented.

(b) Immigration occurs, and immigrants’ labor can be employed in both the agricultural sector and the video game sector.

(c) A new programming language is invented that is less costly to code and is more memory-efficient, enabling the use of smaller game cartridges.

(d) A heat wave and drought result in a 10 percent decrease in usable farmland.

Short Answer

Expert verified

The production possibility curve for video games and food production is,

(a) The production of food will increase, and the PPC rotates along the x-axis.

(b) The production of both video games and food will increase shifting the PPF rightwards.

(c) The production of video games will increase, and the PPC rotates along the y-axis.

(d) The PPC curve shifts inward as famine will lead to less production of food.

Step by step solution

01

Step 1. Production Possibility Curve.

The Production Possibility Curve (PPC) shows the combinations of outputs that can be produced in an economy.

02

Step 2. The diagram.

The production possibility curve for facing increasing opportunity costs for producing video games and food is,

03

Part (a). New and Better Fertiliser

The PPC curve will rotate along the x-axis and the production of food increases but the production of video games will not change.

04

Part(b). Immigration

The production of both video games and food will increase since the immigrant laborers can be employed in both sectors shifting the PPF rightwards.

05

Part (c). A new programming language.

The PPC curve will rotate along the y-axis and the production of video games increases but the production of food will not change as the new technology will improve the production.

06

Part (d). A heatwave and drought resulted in famine.

The PPC curve shifts inward as famine will lead to less production of food and the production of video games will not change.

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