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-(Figure: Production Possibilities and Circular-Flow Diagram)Use Figure: Production Possibilities and Circular-Flow Diagram.Assume the two figures represent the same economy.Suppose that in the circular-flow diagram most firms undergo a significant increase in productivity.This results in a significant increase in the output of both coconuts and fish.If all other variables remain unchanged,then the adjustment in this economy would be BEST represented in the production possibilities figure by a movement from point A toward:
A)point A (no movement).
B)point B (a decrease in coconut production and an increase in fish production).
C)point C (a decrease in coconut production).
D)point D (an outward shift of the entire curve).

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Use the following to answer question:

-(Figure: Production Possibilities and Circular-Flow Diagram)Use Figure: Production Possibilities and Circular-Flow Diagram.Assume the two figures represent the same economy.Suppose that in the circular-flow diagram most firms undergo a significant increase in productivity.This results in a significant increase in the output of both coconuts and fish.If all other variables remain unchanged,then the adjustment in this economy would be BEST represented in the production possibilities figure by a movement from point A toward:
A)point A (no movement). 
B)point B (a decrease in coconut production and an increase in fish production). 
C)point C (a decrease in coconut production). 
D)point D (an outward shift of the entire curve).

Quizplus · Accepted Answer

An increase in productivity for most firms would result in an increase in both coconut and fish production, leading to an outward shift of the production possibilities curve. Therefore, the correct answer is D, an outward shift of the entire curve.

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