Economics
The production possibilities curve represents the maximum level at which a country can produce. Freer trade, such as what the EU has promoted since its inception, allows countries to do two things. The first is that it allows them to produce at their production possibilities curve. This occurs because the country under free trade conditions is going to produce those goods in which it has a comparative advantage. This improves the efficiency of production because the country is producing goods at which it is better at producing, and as it produces more of those goods than it otherwise would the country will also have better economies of scale. A country will produce at a higher level of efficiency after free trade than it did before, bringing it closer to the production possibilities curve.
The other thing that happens under free trade is that the production possibilities curve is that it gets pushed outward. The improved efficiency from free trade is likely to increase the production capacity of the nations engaged in the trade. As a result, not only with the countries involved meet their old production possibilities curve, but they will see their production possibilities curves move as well.
2. An economy that is operating inside its production possibilities frontier is not operating at its capacity. There are issues within that economy with respect to efficiency. This economy should be able to increase production of any good at this point, a new good or existing one, because there is unused productive capacity in the economy. The country has resources that are being unused (Investopedia, 2011). If those resources are used, then the country will be in a position to experience economic growth up until the point where the production reaches the production possibilities frontier.
3. There are a number of reasons that the production possibilities frontier is pushed outward. Two of the main ones...
Examples like this occur throughout the EU, whereas at one point many nations within Europe had their own industries for most goods. The standard of living in Europe has increased over the time that the EU has been around, but that can be said of most nations on Earth. The key to evaluating Europe's progress under the EU experiment is to consider if the standard of living in Europe is
Production Possibilities Production possibility curves are representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. In addition, the graph represents maximum specified production level of one commodity that results given the production level of the other (Samuelson, 1962). The curve is used to describe consumers' choice between two different goods. The curves represent a wide
This situation is perfectly illustrated by the figures. As one may observe, as the units of produced goods increases, the number of units of produced services decreases. The maximum number of units of goods can be produced only if no units of services are produced at the same time. A d) if the country's economy is producing on its production possibility frontier, the opportunity cost cannot be increased, it cannot
A most relevant example of a monopolistic competitive industry is given by the fast food industry. There is a great supply and demand for fast food products; numerous companies make the products, from international conglomerates such as McDonalds, to small local stores. And everybody consumes one time or another fast food products, from children to adults and senior citizens. Furthermore, the industry provides a wide array of products, including
In other words, these companies expand their business, reach a peak in their business activity, and then go through a period of recession, followed by a period of business expansion, and so on. It is important that companies understand that the economic sector they represent follows the same business cycle. Therefore, it is difficult for companies to expand their business during periods of recession in the economic sector they represent.
There is a fixed amount of output possible for any given investment in production capacity, at all possible costs, and if we plot all the potential scales of output against the resulting average cost per unit of production, the result is a long run average total cost curve (LRATC). These economies and diseconomies of scale cause the LRAC to fall from a high origin to a minimum point, and
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