Flood Wipes Out Machinery
The question
The country of Sarnhold produces two goods and is currently producing on its production possibilities curve. A prolonged flood ruins much of Sarnhold's machinery and warehouse equipment, and none of what was ruined will be replaced. Assume Sarnhold's technology is unchanged and its remaining resources stay fully employed. Show the effect of this event on Sarnhold's production possibilities curve. 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.
Flood Wipes Out Machinery: the worked answer
On the Production Possibilities graph, The PPC frontier shifts inward.
Why The PPC frontier shifts inward
An economy's capital stock is one of the resources that set how much it can produce when everything it owns is put to work. Losing much of Sarnhold's machinery and warehouse equipment for good shrinks that resource, so the largest quantity of each good the country can turn out falls and the frontier shifts inward. The prompt also says the surviving resources stay fully employed, so this cannot be shown as the economy slipping to a point inside its curve; the economy's capacity itself is smaller, so the whole curve moves inward.
What happens to the equilibrium
Sarnhold's maximum attainable output of both goods falls, and combinations the country could produce before are no longer attainable.
The mistake students make on this one
A very common error is to leave the curve exactly where it is and mark a point inside it instead, treating the disaster as idle resources. A point inside the frontier means the resources still exist but sit unemployed. Here the machinery is gone for good, so the economy's capacity itself is smaller and only an inward shift of the frontier shows that.
On exam day
Ask whether the resources still exist; unemployment or inefficiency puts the economy at a point inside an unchanged frontier, while resources destroyed and never replaced move the frontier itself inward.
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 inward 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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