Assuming that consumption goods are on the y-axis and capital goods are on the x-axis, a technological improvement in producing capital goods will:
A) shift the production function outward.
B) shift the production function out on the y-axis but it will stay the same on the y-axis.
C) shift the production function inward.
D) shift the production function out on the x-axis but it will stay the same on the y-axis.

Question

Quizplus · Accepted Answer

A technological improvement in producing capital goods will increase the production capacity for capital goods, shifting the production possibility frontier outward on the x-axis, while the capacity for consumption goods remains unchanged.

Assuming That Consumption Goods Are on the Y-Axis and Capital