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O Levels Economics (2281)•2281/12/O/N/19
Question 2 from 2281/12/O/N/19

Explanation

Interpreting movement on the production possibility curve

Steps:

  • Locate points X and Y on the PPC diagram, where X produces fewer consumer goods and more capital goods.
  • Observe that Y shows higher consumer goods output without sacrificing capital goods, indicating an outward shift in the curve.
  • Recognize this biased outward shift reflects sector-specific efficiency gains.
  • Match to option C, as it describes productivity improvement in consumer goods.

Why C is correct:

  • Per economic definition, an increase in productivity in one sector (e.g., via technology) causes a biased outward shift in the PPC, allowing more output of that good without reducing the other.

Why the others are wrong:

  • A: Demand changes affect quantity supplied but not the PPC's position or feasible production points.
  • B: Rising opportunity cost occurs with movement along the curve due to resource reallocation, not a shift.
  • D: An inward PPC shift indicates reduced resources or productivity, opposite of the observed increase.

Final answer: C

Topic: Production possibility curve (PPC) diagrams

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