-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If the labor supply increases due to immigration, the new equilibrium is most likely to be
A) point f.
B) point d.
C) point b.
D) point e.
E) point h.

Question

-Refer to the production possibility graph above. Assume that the economy is in equilibrium at point e. If the labor supply increases due to immigration, the new equilibrium is most likely to be
A) point f. 
B) point d. 
C) point b. 
D) point e. 
E) point h.

Quizplus · Accepted Answer

An increase in the labor supply due to immigration would likely shift the production possibility frontier outward, indicating that the economy can produce more of both goods than before. Point h represents a position beyond the original equilibrium (point e) on the production possibility frontier, suggesting an increase in the potential output of the economy, which aligns with the effects of an increased labor supply.

-Refer to the Production Possibility Graph Above