Refer to the above diagram. Which of the following is the most likely cause for a shift in the production possibilities curve from AB to CD?

Question

Quizplus · Accepted Answer

An increase in the quantity and quality of labor resources would lead to an outward shift of the production possibilities curve from AB to CD. This is because an increase in labor resources would lead to an increase in the total output that the economy is capable of producing. It would enable the economy to produce more of both goods A and B, thereby shifting the production possibilities curve outward. Option A is incorrect because it assumes that the economy was not operating at full efficiency before the shift in the production possibilities curve. Option B is incorrect because an increase in spending of business and consumers would lead to an increase in demand for goods but would not necessarily increase the economy's capacity to produce more goods. Option C is incorrect because an increase in government purchase of the economy's output is essentially a transfer of resources from the private sector to the public sector and would not necessarily lead to an increase in the economy's capacity to produce more goods.

Refer to the Above Diagram