Question

If there is a production method with improved efficiency, holding all else constant, ______.

• A. the production possibilities frontier will shift inward
• B. there may be increase in cost of production
• C. the production possibility curve will shift inward
• D. the production possibilities frontier will shift outward

Answer 1

The correct option is D the production possibilities frontier will shift outward

If there is a production method with improved efficiency, holding all else constant, the production possibility frontier will shift outward. Where there is an advancement of technology or increase in availability of resources or introduction of a production method with improved efficiency in respect to both the goods, then PPF will shift to the right, i.e. outwards. This is because the more of both are goods are being produced due to the above factors.