The production possibilities frontier will shift outward A. if resources are used to produce consumption goods. B. if production occurs outside the production possibilities frontier. C. if resources are not used in production. D. if technology declines. E. if resources are used to produce capital goods.

Question

Rayne Singh

Business

3 September, 04:45

The production possibilities frontier will shift outward A. if resources are used to produce consumption goods. B. if production occurs outside the production possibilities frontier. C. if resources are not used in production. D. if technology declines. E. if resources are used to produce capital goods.

+2

Answers (1)

Know the Answer?

Enrique Bailey · Answer 1

The correct answer is option E.

Explanation:

The production possibility curve or frontier shows the different bundle of two goods that can be produced using limited resources. The curve is concave to the origin. This is because of increasing opportunity cost. This means that when we increase the production of one good the opportunity cost of sacrificing its alternative goes on increasing.

The outward shift in the production possibility curve shows an increase in production. Capital goods are the goods that can be used for further production of goods and services. When the resources are used to produce capital goods, these goods can again be used in the production process to produce more goods. This will cause the production possibility curve to shift outward.