Question

Ceteris paribus, which of the following might result in a rightward shift in a hypothetical nation's production possibility curve?

A decrease in population

A technological advance

A reduction in unemployment

A shift from gun production to butter production

Answer 1

The correct answer is (B) A technological advance

Production Possibility Curve (PPC) shows the the combinations of goods that a nation can produce If it uses all of its resources efficiently with the given technology.

A decrease in population can be considered as decrease in labor resources and hence Now If it uses all of its resources efficiently then Nation can now produce less amount of goods. Hence, PPC will shift to the left. So, option (a) is incorrect.

Advancement in technology means that with the given level of inputs Nation can now produce more amount of goods and services. Hence combinations of goods that a nation can now produce will increase and hence PPC will shift to the right. So, option (b) is correct.

As discussed Production Possibility Curve (PPC) shows the the combinations of goods that a nation can produce If it uses all of its resources efficiently with the given technology. If there is unemployment then this means Nation is not producing on PPC. So, reduction in unemployment means that nation is now producing closer to PPC and If unemployment is 0, then it is producing on PPC. So, This reduction in unemployment will not effect PPC. It is just the movement of point from inside the PPC towards PPC. So, option (c) is incorrect

A shift from gun production to butter production, this means it is now producing less of gun and more of butter. This means it is just the movement of points on the PPC curve. There is no increase in production capacity of the nation and hence PPC will remain same. So option (d) is incorrect.

Hence, the correct answer is (B) A technological advance