Question

When an economy sacrifices production of consumption goods to produce more capital goods, we would expect that the production possibilities curve will a. shift outward. b. shift inward. c. become a straight line. d. shift about in random fashion.

Answer 1

Answer: b. shift inward

Explanation: The curve is delayed in because although capital goods would increase in the possibilities curve, consumer goods are retracted, so that the fault would have a tendency to lean in closer to zero because consumer goods would not increase in same proportion. This is the same as saying that the production capacity will be limited because to increase the amount of consumer goods produced must be reduced, this way the possibilities curve behaves