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

Question

Quizplus · Accepted Answer

The destruction caused by the hurricane reduces the economy's capacity to produce both consumption and capital goods, shifting the production possibilities frontier inward.

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