As an economy grows,
A) its PPF shifts outward.
B) it can eliminate scarcity.
C) the opportunity cost of production will approach 0.
D) the opportunity cost of production will increase.
E) its PPF does not shift; instead, the production point moves from inside the PPF to be closer to the PPF.

Question

Quizplus · Accepted Answer

As an economy grows and becomes more productive, it will be able to produce more goods and services using the same amount of resources. This means that the production possibilities frontier (PPF) will shift outward, indicating that the economy can now produce more of both goods. The opportunity cost of producing one good in terms of the other will remain positive, so the answer cannot be B or C. As the economy produces more and more of the same goods, it will face increasing opportunity costs, so the answer cannot be D. Finally, the answer cannot be E, as the PPF itself will shift outward, not just the production point.

As an Economy Grows