Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
-Refer to Figure 2.3.Consider the following events: a.an increase in the patent protection period to 30 years
b.an increase of a nation's capital stock
c.an improved property rights system
Which of the events listed above could cause a movement from V to W?

Question

Figure 2.3  Figure 2.3 shows various points on three different production possibility frontiers for a nation.
-Refer to Figure 2.3.Consider the following events: a.an increase in the patent protection period to 30 years
b.an increase of a nation's capital stock
c.an improved property rights system
Which of the events listed above could cause a movement from V to W?

Quizplus · Accepted Answer

An improved property rights system (event c) can lead to a shift from point V to point W on a production possibility frontier. This is because better property rights lead to greater security of ownership and enable firms to invest more in long-term projects, leading to an increase in the overall level of productivity. An increase in the patent protection period (event a) is also likely to increase productivity in the long run, but it is not clear how this could directly cause a shift from V to W on the production possibility frontier. An increase in a nation's capital stock (event b) is also likely to increase productivity, but it is unclear how this alone could lead to a shift from V to W without other factors such as improved technology or skills.

Figure 23 Figure 2