Question

Suppose France produces two types of goods: agricultural and capital.

Suppose France produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier tor alfalfa, an agricultural good, and airplanes, a capital good.

 

Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers. 


Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

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Answer #1

Since alfalfa is an agricultural good, if there is decline in the number of workers, then production of labor intensive good will fall because of decline in the inputs of production. Thus, PPF will pivot as shown in the diagram where the production of alfalfa has fallen.

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