What would we have to assume before constructing a society's production possibilities frontier?
What will be an ideal response?
That the quantity of resources remains constant.
That the technology available for use in production remains constant.
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A production possibilities frontier is a model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently. In order to preserve ceteris paribus, we assume that the technology available for use in production and the quantity of resources remain constant.
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Key determinants of economic profit include ________
A) the revenue from selling goods and services B) the cost incurred in buying capital C) the cost of hiring labor D) all of the above E) none of the above
John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
a. Harry has a comparative advantage in ironing.
b. Harry has a comparative advantage in typing.
c. Harry has an absolute advantage in typing.
d. Harry has an absolute advantage in ironing.
e. Neither can gain from specialization and exchange.
An economy in which output has decreased and prices have decreased would suggest a:
A. decrease in short-run aggregate supply. B. increase in aggregate demand. C. increase in short-run aggregate supply. D. decrease in aggregate demand.
Firms may react to a payroll tax by
A. hiring more labor. B. reducing their output. C. shifting to less capital intensive techniques. D. substituting labor for capital.