Answer to Question #235169 in Microeconomics for Gill saab

Question

Using a production possibilities frontier (PPF) diagram, determine how does a country’s PPF change in response to the events described below.
Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.
a) Reducing import taxes (tariffs) on primary inputs
b) Increasing the expenditure on research and development
c) The introduction of greater flexibility in labour markets (new government laws
enabling easier hiring of workers)
d) Increasing skilled migration into a country
e) The discovery of new mineral deposits in a country

Answer 1

a)

Reducing import taxes on primary inputs will increase resources for production (sector biased effect)

b)

Increase of expenditure on research and development will lead to reduced cos of production due to technological research. (neutral effect).

c)

The easier hiring of workers will increase labour resources for production (neutral effect)

d)

Increasing skill migration will increase the resources for production ( neutral effect)

e)

Discovery of new mineral will make trade efficient (sector biased effect)