Chapter 2 Model Building and Gains from Trade Page 36 22 Wha

Chapter 2: Model Building and Gains from Trade Page 36 2.2. What iso production possibil s fronte Assume that an economy produces only two goods, pizza and wings. Which of the following are ways to increase the maximum possible number of pizzas produced? Activity Score 605 096 growth in labor force improved wing-making technology improved pizza-making technology more efficient use of existing production assets

Solution

Answer : 2.2) \"Production possibility frontier\" curve shows the maximum possible output level by using the existing input resources and factors in the economy.

All given options are correct to produce the maximum possible pizzas number. Because,

If \"labour force\" increase and this increased labour inforce are used in pizza production then this will increase the production level of pizzas.

If \"pizza making technology\" improve then this will increase the pizza production level.

If \"wing making technology\" improve then this decrease the demand for labour which increase the labour supply in the economy and as the economy only produces two goods pizza and wings, hence the increased labour supply will be used in the production of pizza and as a result the pizza production will increase.

If \"the existing production assets\" are used more efficiently in pizza production then this will also increase the pizza production level.