Answer to Question #205884 in Economics of Enterprise for LESEGO

Question

An increase in the population that is unemployed is best represented in Figure 1.2 and using PP1 by movement from point

Answer 1

The production possibility frontier would result in the maximum production which would result in the given technology and the resources. The point inside the production possibility frontier would result in the underutilization of the resources.

The point inside the production possibility frontier would result in the some units of the labor and capital to remain unemployed and as a result there is an increase in unemployment. The production possibility frontier would result in the increase in the opportunity cost when the curve slopes downward.

The production possibility frontier would result in the curve sloping downward and is concave which would result in the maximum output that can be produced with the given technology and the resources. The unemployment would result in the point shift inside the frontier.

Thus, the unemployment would result in the fall in output and underutilization of the resources which would cause the shift of the point inwards from point C to point A.

Thus, option c is correct.

The point shifts from C to D would result in the fall in unemployment. Thus option a is incorrect.

The point shifts from D to C would result in the full employment from one production possibility frontier to another possibility frontier. Thus, option b is incorrect.

The point E to D would result in the fall in the unemployment thus option d is incorrect.