Author Question: What happens to a country's production possibility frontier if it experiences a natural disaster ... (Read 43 times)

ss2343 · **on:** Jun 29, 2018

What happens to a country's production possibility frontier if it experiences a natural disaster such as a hurricane or an earthquake? Explain.

What will be an ideal response?

Question 2

The problem with a common resource is that no one gets to use the resource. Comment on the preceding assertion.

What will be an ideal response?

ndhahbi · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The production possibility frontier will shift in. This occurs because the destruction from the hurricane or earthquake likely destroys resources such as capital and natural resources that are used to produce goods and services. Since the quantity of resources in the country is now lower, the country will not be able to produce as much output.

Answer to Question 2

The assertion is totally false; the problem with a common resource is that too many people use the resource so that it is overused and depleted. A common resource is rival, so that one person's use of the resource decreases other people's use, but nonexcludable, so that no one can be prevented from using the common resource. As a result, everyone has the incentive to use the resource and no one has the incentive to conserve the resource.