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Figure: Production Possibilities and Circular-Flow Diagram
-(Figure: Production Possibilities and Circular-Flow Diagram) Look at the figure Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor flowing to the firms that produce coconuts. If all other variables remain unchanged, this adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:
A)point A (no movement).
B)point B (a decrease in coconut production and an increase in fish production).
C)point C (a decrease in coconut production).
D)point D (an outward shift of the entire curve).

Question

Use the following to answer questions :
Figure: Production Possibilities and Circular-Flow Diagram 
-(Figure: Production Possibilities and Circular-Flow Diagram) Look at the figure Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor flowing to the firms that produce coconuts. If all other variables remain unchanged, this adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:
A)point A (no movement). 
B)point B (a decrease in coconut production and an increase in fish production). 
C)point C (a decrease in coconut production). 
D)point D (an outward shift of the entire curve).

Quizplus · Accepted Answer

A decrease in labor flowing to the firms that produce coconuts would result in a decrease in coconut production, so the production possibilities curve would move from point A toward point C, representing a decrease in coconut production.

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