Which of the above diagrams best portrays the effects of declines in the prices of imported resources?
A)A
B)B
C)C

Question

Which of the above diagrams best portrays the effects of declines in the prices of imported resources?
A)A 
B)B 
C)C

Quizplus · Accepted Answer

Diagram A shows an outward shift of the production possibility frontier (PPF), indicating an increase in potential output due to the lower prices of imported resources. This is the most accurate representation of the effects of a decline in imported resource prices. In contrast, Diagrams B and C show movements along the PPF rather than an outward shift, which implies that there is no increase in potential output. Diagram D shows an inward shift of the PPF, which would result from an increase in imported resource prices, not a decrease.

Which of the Above Diagrams Best Portrays the Effects of Declines