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 inward at all points.
B)There is a movement from the existing production possibilities frontier inwards towards a point with wasted or misallocated resources.
C)There is a movement along the existing production possibilities frontier towards a less capital- intensive point.
D)It shifts outward at all points.
E)There is a movement along the existing production possibilities frontier towards a more capital- intensive point.

Question

Quizplus · Accepted Answer

The destruction of resources such as houses, roads, schools, and factories reduces the economy's capacity to produce both consumption and capital goods, causing the production possibilities frontier to shift inward at all points.

Suppose a Hurricane Causes Extensive Devastation, Destroying Houses, Roads, Schools