Which of the following scenarios would cause the Production Possibilities Curve (PPC) to shift outward?

• A. An improvement in technology that increases productivity
• B. A reduction in the stock of capital goods due to natural disaster
• C. A movement from an inefficient point inside the PPC to a point on the PPC
• D. A decrease in the available labor force due to emigration

Answer: (A)

Verified step by step guidance

1. Understand that the Production Possibilities Curve (PPC) represents the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.
2. Recall that the PPC can shift outward or inward depending on changes in the economy's resource base or technology. An outward shift means the economy can produce more of both goods, while an inward shift means less production capacity.
3. Analyze each scenario: An improvement in technology that increases productivity means the economy can produce more output with the same resources, which shifts the PPC outward.
4. A reduction in the stock of capital goods due to a natural disaster decreases the economy's productive resources, causing the PPC to shift inward.
5. A movement from an inefficient point inside the PPC to a point on the PPC represents better utilization of existing resources but does not shift the curve itself; it is a movement along the curve, not a shift.