Question

Recently, a major bush-fire occurred in Australia. What impact would this have on the nation's production possibilities frontier and why?

A) It would shift outward because unemployment would be reduced.

B) Nothing would happen because the nation would still have the same capabilities.

C) A tradeoff would occur to replace the resources and goods destroyed.

D) It would shift inward because some of the nation's resources, such as capital and labor, would have destroyed.

E) It would not shift because people would get to work to replace any capital that was destroyed.

Answer 1

The immense Australian Bush-fire have destroyed the country's resources that are jungles, plants, woods, animals. This reduction in natural resources would cause the PPF curve to shift inward.

PPF shows combinations of two goods that can be produced used efficient use of the technology and available resources.

Due to the insufficient resources to produce the goods, the PPF will shift inward. The nation's capabilities have been reduced. It will not shift outward as there will a reduction in future growth and unemployment of resources.

Hence, option D) is correct