Answer to Question #207543 in Microeconomics for qianhe

Question

Production at Point A - 0 Tubas & 25 dishwashers 

Production at Point B - 30 Tubas & 20 dishwashers 

Production at Point C - 50 Tubas & 10 dishwashers 

Production at Point D - 60 Tubas & 0 dishwashers 

Production at Point E - 40 Tubas & 20 dishwashers 

Production at Point F - 30 Tubas & 10 dishwashers 

Using the production possibilities frontier above:

Explain what would happen to the production possibilities frontier if there were a technological breakthrough in producing tubas.     

Answer 1

Solution:

The production possibility frontier will experience a pivot shift to the right or outwards affecting only tubas. The PPC curve will pivot on the horizontal axis since only tubas will be affected.

 

This is because the technology breakthrough will affect the production of tubas which will be cheaper. The producers will respond to the cheaper production process by increasing the output of tubas, shifting the supply curve outwards. Opportunity costs will also increase as more tubas are produced since the technology breakthrough will enable more output to be produced with the same quantity of resources. At the same time, the production of dishwashers will not change since it will not be affected.