Question

A production possibilities curve can shift inward if there is an increase in productivity A an increase in unemployment B an increase in the price of raw materials C a misallocation of resources D a natural disaster

Answer 1

Answer:

All options except A

Explanation:

All the options except productivity (option A) will shift the production possibility curve (PPC) inward.

The factors that shift the PPC inward are; decline in labor demand (increase in unemployment), decrease in capital and technology backwardness.

Unemployment increases during economic recession and increases during economic boom. Recession occurs when there is a decline in aggregate demand; and a decrease in aggregate demand forces businesses to cut jobs, which shifts the production possibility curve inward.

Increase in the price of raw materials elevates the cost of production and the ability of the producer to produce more. Thereby reducing output, hence an inward shift of the PPC.

Mis-allocation of resources causes the business to produce less than its optimum capacity, hence a reduction in output and an eventual inward shift of the PPC.

A natural disaster leads to economic crunch and a decline in aggregate demand, hence an inward shift of the PPC