A firm producing calculators and cell phones purchases new machinery that increases the productivity of producing calculators.Assuming that the number of calculators produced is measured on the x-axis and the number of cell phones produced is measured on the y-axis,how will the introduction of the new machinery change the firm's production possibilities curve?

Question

Quizplus · Accepted Answer

The introduction of new machinery that increases the productivity of producing calculators allows the firm to produce more calculators for any given amount of cell phones. This is represented by a pivot of the production possibilities curve rightward about the x-axis, which reflects an increase in the maximum potential output of calculators while the output of cell phones remains unchanged.

A Firm Producing Calculators and Cell Phones Purchases New Machinery