INTRODUCTION All economies have a production possibility curve and there any many different things that effect it. The removal of trade barriers or also known as free trade is not exempt from this list of things that affect an economies production possibility curve. Reduction in trade barriers can cause a country’s production possibility curve to shift outward. That is just one of many reasons that could cause an economy’s production possibility curve to shift outward. This production possibility curve can also determine an economy’s efficiency. In the Case in Point essay “The European Union and the Production Possibilites Curve,” comparative advantage One example of an increase in the standard of living among the trading nations would be an increase of material goods and necessities. Material goods and necessities are now easily traded between nations and industries causing them to be cheaper and more easily obtained. This increase of material goods and necessities would raise the standard of living in that nation. Another example of an increase in the standard of living among the trading nations would be the reduction in the cost of goods. Due to the removal of trade barriers the cost of goods should go down. With the reduction in the cost of goods, the wealth and happiness of that trading nation should increase. A reduction in the cost of products and an increase in wealth and happiness among members of the trading nations raise the standards of living for those nations. Free trade among nations has advantages and disadvantages. It is argued that, overall, despite the disadvantages of free trade all parties come out ahead in the end. One example of an advantage of free trade is increased efficiency. By a nation increasing production due to free trade, that nation would then increase their efficiency. Nations would then be able to better allocate their resources and buy cheaper resources from other trading nations. Another example of an advantage of free trade is customer satisfaction. Free trade leads to an overall larger market and consumers then benefit from the competition and
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www.studyguide.pk 1 SHAPE OF PRODUCTION POSSIBILITY CURVE: Shape 1: Concave Good Y A P Q 0 Good X B The slope of the production possibility curve is the Marginal Rate of Transformation (MRT) which indicates the rate at which one good is being transformed into another, not physically, but by transferring resources from one good to another good. As we move along the production possibility curve through points P and Q downwards, slope or steepness of each tangent through…
Production Possibilities Curve Introduction The production possibility curve results from graphing the efficient combinations of output for an economy that is using its factors of production at their full potential, allocating its resources in the best possible way. The slope of the production possibility curve is always negative when production is at its full potential because to increase output of one product, resources must be allocated away from another product, forcing the economy to forego…
possible level of production. b. Increasing the production of a particular good will cause the price of the good to remain constant. c. In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods. d. None of the choices are correct. 3. Economic growth would best be represented by a a. Shift outward of the production possibilities curve. b. Shift inward of the production possibilities curve. c. Movement from…
Assuming the all retirees refrain from working, the Production Possibilities Frontier would as a result of this change a) shift out b) shift in c) have a positive slope * d) have a negative slope Q14 The demand curve for cinema tickets shifts to the right. This would be caused by a) a fall in price of cinema tickets * b) an increase in the price of DVD’s…
Minister back a step into producing these schools and clinics. b) A production possibilities curve shows the maximum possible outputs of 2 goods that can be produced. It shows how much we can produce with a fixed amount of resources and the given state of technology. The reason why it is curved and not straight is because a slope of a curve shows opportunity cost. Opportunity cost is the amount of other products that must be sacrificed to obtain an addition…
fluctuations in Real GDP around the natural rate. Both the production possibilities curve and the long-run aggregate supply curve were assumed to be fixed. However, experience shows that these curves are not fixed. In the long run, the standard of living depends more on creating economic growth and shifting the production possibilities frontier and long-run aggregate supply curves rightward than upon minimizing fluctuations around these curves. Chapter 17 looks at how economic growth can occur and explains…
1. Improvements in technology for producing all goods must result in (A) an inward shift in the production possibilities curve (B) an outward shift in the production possibilities curve (C) a flatter production possibilities curve (D) a steeper production possibilities curve (E) greater unemployment of labor 2. The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price…
concepts of Absolute and Comparative Advantages. I will define them both in my own words, and give you an example to better explain what they mean. We will then talk about the effects trade has on production possibilities, and we will go over a couple different factors that expand the production possibilities. We will look at free trade, what exactly that is as compared to what we currently have now. Lastly, I will give you my own thoughts, with supporting material, on global trade. First we are going…