A Decade of Building Capital
The question
The curve shown is the production possibilities curve of the country of Verath at the start of a decade; Verath produces only capital goods and consumer goods. Over the ten years that followed, Verath consistently chose combinations containing a high share of capital goods and a low share of consumer goods, and the machinery, tools, and factories built in those years are now in place and operating. Assume Verath's labor force, natural resources, and technology are unchanged. Show Verath's production possibilities curve at the end of the decade. Show the effect on the Production Possibilities graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
A Decade of Building Capital: the worked answer
On the Production Possibilities graph, The PPC frontier shifts outward.
Why The PPC frontier shifts outward
Choosing a capital-heavy combination year after year adds to the stock of machinery, tools, and factories, and that stock is itself one of the resources an economy draws on to produce. After a decade of that choice Verath holds more capital than it started with, so it can now produce more of both goods and the frontier lies beyond where it stood at the start of the decade. The labor force, natural resources, and technology are unchanged, so the entire gain comes from the capital accumulated during those years.
What happens to the equilibrium
Verath can now produce more capital goods and more consumer goods than it could at the start of the decade.
The mistake students make on this one
Students often answer by picking a different point on the existing curve, one weighted toward capital goods, because that is the choice Verath made each year. That movement along the curve is the choice, not its result: it only shows consumption being given up today. The capital those years produced is what raises capacity afterward, and the question asks for that later effect, which only an outward shift of the whole frontier can show.
On exam day
Separate the choice from its payoff on an investment question: picking a capital-heavy point is a movement along today's frontier, while the capital that choice builds shows up years later as an outward shift of the entire frontier.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when The PPC frontier shifts outward and every other curve on the Production Possibilities graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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