Improvements in the methods of production allow for the creation of which of the following?

• A. an outward shift of the production possibilities frontier
• B. a movement from a point inside the PPF to a point outside the PPF
• C. a decrease in opportunity cost for all goods
• D. a reduction in the attainable combinations of goods and services

Answer: (A)

Verified step by step guidance

1. Understand what the Production Possibilities Frontier (PPF) represents: it shows the maximum possible output combinations of two goods or services an economy can produce given available resources and technology.
2. Recognize that improvements in production methods mean technological progress, which allows more output to be produced with the same amount of resources.
3. Analyze how technological improvements affect the PPF: since more output is possible, the PPF shifts outward, indicating an increase in productive capacity.
4. Distinguish this from movements along the PPF or from inside to outside the PPF: an outward shift means the entire frontier moves, not just a point moving within or beyond the current frontier.
5. Conclude that improvements in production methods do not reduce opportunity costs for all goods necessarily, nor do they reduce attainable combinations; instead, they expand the set of attainable combinations, represented by an outward shift of the PPF.