Consider an isolated island producing only two outputs, Coconut
and Banana, by using its fixed amount of resources (inputs). Assume
that due to a natural disaster half of the resources of the island,
which are used to produce outputs, are destroyed. How does this
effect the production possibilities frontier of the island.
Illustrate this change in a well-labelled diagram. Now, instead of
a natural disaster, assume an entrepreneur in the island invented a
new tool that allows collecting bananas from the trees two times
faster, but it is useless in collecting coconuts. How does this
affect the production possibilities frontier of the island.
Illustrate this change in a well-labelled diagram. [Maximum word
limit is 80 for this question.]
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