Final answer:
An increase in labor supply shifts the PPF outward for both cloth and food because the economy now can produce more of both goods, although cloth may benefit more directly from the increased labor.
Step-by-step explanation:
The question is asking about how an increase in the labor supply would affect the Production Possibilities Frontier (PPF) for cloth, which is labor intensive, and food, which is capital intensive. An increase in labor means that the economy now has more of one of the two resources used in production: labor and capital. Since the PPF represents the maximum possible output an economy can produce given a set of resources, an increase in labor would shift the PPF outward for both goods as the economy can now produce more of both. However, the shift might not be uniform because cloth is labor intensive, meaning it will benefit more directly from an increase in labor than food, which is capital intensive. Despite this, food production will still benefit indirectly as freeing up labor resources may allow for an increase in capital-intensive food production. Therefore, the correct answer is A. The PPF shifts outward for both cloth and food.