Question

The Micro Islands have traditionally produced large amounts of Starfish and provided a relatively small amount of labor for hotels, docks, etc. that service the cruise ships that visit our island. As economic advisor, you’ve just learned that five more cruise lines will be visiting Micro Island each week.

1. Using a correctly drawn and labeled production possibilities curve, demonstrate the reallocation of resources that will need to take place for this to work efficiently.
2. Show how the influx of more skilled workers from neighboring islands would be reflected in the production possibilities curve. (Draw a second PPC graph)
3. Finally, show the impact of too many new laborers moving to the islands on a new production possibilities curve.

Answer 1