-Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas.Hotels are a capital good that,once built,will help produce still more consumption goods.If Puerto Rico produces more hotels than Hawaii,
A) Hawaii's PPF will shift outward further than Puerto Rico's PPF.
B) Hawaii's PPF will shift inward.
C) Puerto Rico's PPF will not shift.
D) Puerto Rico's and Hawaii's PPF will shift outward by the same amount.
E) Puerto Rico's PPF will shift outward further than Hawaii's PPF.

Question

-Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the above figure is the PPF for hotels and consumption goods in the two areas.Hotels are a capital good that,once built,will help produce still more consumption goods.If Puerto Rico produces more hotels than Hawaii,
A) Hawaii's PPF will shift outward further than Puerto Rico's PPF. 
B) Hawaii's PPF will shift inward. 
C) Puerto Rico's PPF will not shift. 
D) Puerto Rico's and Hawaii's PPF will shift outward by the same amount. 
E) Puerto Rico's PPF will shift outward further than Hawaii's PPF.

Quizplus · Accepted Answer

By producing more hotels, which are capital goods, Puerto Rico is investing in its future production capabilities. This investment increases its ability to produce more in the future, leading to an outward shift in its PPF further than Hawaii's, assuming Hawaii invests less in capital goods.

-Suppose Puerto Rico and Hawaii Currently Have the Same Production