Suppose Puerto Rico and Hawaii currently have the same production possibilities

Question

Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the figure is the PPF for hotels and consumption goods in the two areas. Hotels are a capital good that,once built, will help produce still more consumption goods.. According to the figure, which island will have more rapid economic growth? Hotels (number per year) 15 12 Puerto Rico O A. Hawaii O B. Neither Hawaii nor Puerto Rico will grow. OC. Puerto Rico Hawail D. O E. Both Hawaii and Puerto Rico will grow at the same speed. More than one of the above answers is correct. 12 5 Consumption goods (millions per year)

Explanation / Answer

The correct option should be Puerto Rico with a capital or Hotel quantity of 15. Higher the hotel quantity will mean that more of consumption goods can be produced. Thus the Puerto Rico Should have more rapid economic growth.

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