Answer to Question #285716 in Microeconomics for keeks

Question

For each if the following events, describe the likely effect on the country’s production possibilities boundary (PPB). Start with a PPB like the one below and draw the likely change.

a. Suppose the country has a 10-year civil war that destroys much of its infrastructure.

Use the 3 point curve to draw a new production possibilities boundary on the graph reflecting the change in the infrastructure. Properly label this line. Place end points one on horizontal and one on vertical axes.

Answer 1

A 10- year civil war destroying most of infrastructure means that resources available for production are destroyed and this translates to reduced production which makes the PPB shift inwards as shown below. This can be simply termed as contraction.

Along the points ABC, the economy is efficient in utilization of the available resources and hence maximum production.

With the reduced resources after the civil war, the production shifts to PPB₂ and the efficient production is along points A’B’C’.