Suppose a hurricane causes extensive devastation,destroying houses,roads,schools and factories.What is the effect of this hurricane on a production possibilities frontier consisting of consumption goods and capital goods?
A)It shifts outward at all points.
B)It shifts inward at all points.
C)There is a movement along the existing production possibilities frontier towards a less capital-intensive point.
D)There is a movement along the existing production possibilities frontier towards a more capital-intensive point.
E)There is a movement from the existing production possibilities frontier inwards towards a point with wasted or misallocated resources.

Question

Quizplus · Accepted Answer

The destruction caused by a hurricane damages the resources available for producing both consumption and capital goods, reducing the overall capacity to produce. This results in the production possibilities frontier (PPF) shifting inward at all points, indicating a decrease in the potential production of both types of goods.

Suppose a Hurricane Causes Extensive Devastation,destroying Houses,roads,schools and Factories