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1.1 Economic methodology and the economic problem

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Question 15

An economy produces two categories of output: clean energy infrastructure (a capital good) and retail energy services (a consumer good). It is currently operating at point Y on its production possibility frontier (PPF) as shown below.

Production Possibility Frontier (PPF) showing clean energy infrastructure vs retail energy services

With no immediate change in the position of the PPF, the government initiates a major policy to reallocate resources in order to increase the production of clean energy infrastructure. Which one of the following combinations best describes the most likely consequence for the production of retail energy services in the short run and the long run?

Short-run change: Decrease | Long-run change: Decrease

Short-run change: Decrease | Long-run change: Increase

Short-run change: Increase | Long-run change: Decrease

Short-run change: Increase | Long-run change: Increase

1.1 Economic methodology and the economic problem Questions

  1. A Level
  2. /Economics
  3. /1.1 Economic methodology and the economic problem