Suppose a new hormone is discovered that increases the productivity of the workers in producing beef, but does not affect the production of cabbage. How will that development change the production possibility frontier.
The correct answer and explanation is :
Correct Answer:
The production possibility frontier (PPF) will pivot outward, becoming more bowed or extended on the beef axis, while the cabbage axis remains unchanged.
Explanation:
A production possibility frontier (PPF) represents the maximum combination of two goods that an economy can produce using its available resources and technology efficiently. In this case, the two goods are beef and cabbage. The PPF is typically concave to the origin due to the law of increasing opportunity costs—producing more of one good usually involves giving up increasingly larger amounts of the other.
If a new hormone increases worker productivity in beef production, it means that with the same number of workers and resources, more beef can now be produced. Importantly, the question states that the hormone does not affect the production of cabbage, so there is no change in the maximum amount of cabbage that can be produced with the same resources.
Graphically, this change causes the beef-producing side of the PPF to shift outward, while the cabbage-producing side stays where it was. As a result, the PPF will now pivot outward along the beef axis, creating a new curve that allows for more beef production at every level of cabbage production.
This pivot reflects economic growth in one sector (beef), due to improved technology or productivity in that specific area. It illustrates that the economy can now achieve a higher output of beef without sacrificing cabbage production, or can choose to reallocate resources to produce more of both goods within the new production limits.
This type of change shows biased economic growth, where only one good benefits from the improvement. In contrast, if both goods’ productivity improved, the entire PPF would shift outward in all directions.