Q6 Explain how (if at all) each of ... [FREE SOLUTION]

Chapter 1: Q6 (page 17)

Explain how (if at all) each of the following events affects the location of a country's production possibilities curve.
a. The quality of education increases.
b. The number of unemployed workers increases.
c. A new technique improves the efficiency of extracting copper from ore.
d. A devastating earthquake destroys numerous production facilities.

Short Answer

Expert verified

The country's production possibilities curve will move outward.
The country's production possibilities curve will move inward.
The country's production possibilities curve will move outward.
The country's production possibilities curve will move inward.

Step by step solution

Explanation for part (a)

An increase in the quality of education would cause an increase in the work efficiency of labor and entrepreneurial abilities. It shows an increase in the quality of labor and entrepreneurial abilities. Any increase in the supply of economic resources would increase the economic growth of the country.

Explanation for part (b)

An increase in the number of unemployed workers shows that fewer workers are used in the economy to produce goods and services. It shows a decrease in the supply of economic resources. The reduction in the supply of resources will decrease the size of economic growth, causing a backward shift of the production possibility curve.

Explanation for part (c)

The new technique improves the efficiency of extracting copper from ore. The increased efficiency will allow more production of copper with the same quantity of available ores. An increase in the quantity of copper production will increase the size of the economy.

Explanation for part (d)

The destruction of numerous production facilities will decrease the aggregate quantity of goods and services produced. It will shrink the size of the economy.