Can a production possibility frontier (PPF) ever shift inward? If so, what could cause this to happen?

• A. No, the PPF is fixed and cannot shift.
• B. No, a PPF can only shift outward as economies grow.
• C. Yes, a PPF can shift inward if there is a loss of resources or a decline in technology.
• D. Yes, but only if opportunity costs decrease.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what a Production Possibility Frontier (PPF) represents. The PPF shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.
2. Step 2: Recognize that the PPF can shift due to changes in the economy's resources or technology. An outward shift indicates growth, while an inward shift indicates a reduction in productive capacity.
3. Step 3: Identify factors that could cause the PPF to shift inward. These include a loss of resources (such as natural disasters, depletion of labor force, or destruction of capital) or a decline in technology that reduces productivity.
4. Step 4: Understand that the PPF cannot shift inward simply because opportunity costs decrease. Opportunity cost changes affect the shape or slope of the PPF but do not cause it to shift inward or outward.
5. Step 5: Conclude that the correct answer is that the PPF can shift inward if there is a loss of resources or a decline in technology, reflecting a decrease in the economy's productive capacity.