Question

A construction company plans to build a certain number of apartment buildings and stores on a piece of land. This PPC shows the combination of projects it can build
1) If the amount of land available to the company increases, the PPC will _____.
a) Shift to the left
b) Shift to the right
c) remain unchained
2) The company realizes it cannot construct any buildings on a portion of the land because it is at risk of a cave-in. In this case, the PPC will _____.
a) Shift to the left
b) Shift to the right
c) remain unchained

Answer 1

1)B. Because they have more land now
2)A. Because they have less land now
Shifts right means more supply or demand while left means less

Answer 2

Answer:

1) B

2) A

Explanation:

Production possibility curves (PPC) shows the combination of two commodities that can be made given a certain amount of resources.  

1)  In statement 1, since the land available has increased the company can make more of BOTH apartments and stores. In this case the amount of resource (land) has increased causing the PPC to shift to the right.

2)  Contrary to statement 1, a portion of land is now unusable. Hence it can’t be used to make either apartments or stores on it, at all. The reduction in resource (land) has reduced the amount of BOTH apartments and stores that can be made, causing the PPC to shift to the left.