Answer to Question #289351 in Microeconomics for Brodszko

Question

Suppose a small country produces only food and clothing. An earthquake destroys many of the clothing​ factories, but the ability to produce food is unaffected.

Answer 1

Solution:

The country’s ability to produce clothing will be greatly affected, and thus the economy will shrink due to a failure to allocate resources and optimal production capability. Therefore, the PPC will shift inwards as displayed below: