ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If a new factory was built by a company, what would be the effect on their PPF?
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Inward move of the frontier.
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Outward move of the frontier.
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Movement of the ‘dot’ closer to the frontier.
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Movement of the ‘dot’ away from the frontier.
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Explanation:
Detailed explanation-1: -Outward or inward shifts in the PPF can be driven by changes in the total amount of available production factors or by advancements in technology. If the total amount of production factors like labor or capital increases, then the economy is able to produce more goods at any point along the frontier.
Detailed explanation-2: -An individual production shift in the PPF means that a change in technology or resources affects production of each product in different ways, creating a skewed shift. An inward shift in the PPF means that the production of both goods decreases because of a change in resources or technology.
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