-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)Puerto Rico's and Hawaii's PPF will shift outward by the same amount.
B)Puerto Rico's PPF will shift outward further than Hawaii's PPF.
C)Hawaii's PPF will shift outward further than Puerto Rico's PPF.
D)Puerto Rico's PPF will not shift.
E)Hawaii's PPF will shift inward.

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)Puerto Rico's and Hawaii's PPF will shift outward by the same amount. 
B)Puerto Rico's PPF will shift outward further than Hawaii's PPF. 
C)Hawaii's PPF will shift outward further than Puerto Rico's PPF. 
D)Puerto Rico's PPF will not shift. 
E)Hawaii's PPF will shift inward.

Quizplus · Accepted Answer

If Puerto Rico produces more hotels, it invests more in capital goods, which will lead to a greater outward shift in its PPF compared to Hawaii's, as it will have more capacity to produce consumption goods in the future.

-Suppose Puerto Rico and Hawaii Currently Have the Same Production