A production possibilities curve that is bowed outward (from the origin) represents the concept that A. greater quantities of one good can be produced without reducing the production of other goods. B. production of additional units of one good requires that increasing quantities of the other good be given up. C. opportunity costs are constant. D. resources are not scarce.

Question

Yusuf Allison

Business

20 August, 09:06

A production possibilities curve that is bowed outward (from the origin) represents the concept that A. greater quantities of one good can be produced without reducing the production of other goods. B. production of additional units of one good requires that increasing quantities of the other good be given up. C. opportunity costs are constant. D. resources are not scarce.

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Abe · Answer 1

B. production of additional units of one good requires that increasing quantities of the other good be given up.

Explanation:

PPC is graphical representation of product combinations that an economy can produce, given resources & technology.

It is downward sloping as goods are inversely related, given same resources & technology.

The slope of PPC is Marginal Opportunity Cost i. e additional amount of a good sacrifised to gain an additional unit of other good.

MOC = Δgood sacrifised / Δgood sacrifised.

PPC is concave / outward bending because of increasing MOC. Amount of a good sacrifised to gain an additional amount of other good keeps on decreasing, because resources are not equally efficient in production of all goods.

Ex : GoodX GoodY MOC (Δgood sacrifised / Δgood sacrifised)

1 10

2 9 1:1 (10-9) / (2-1)

3 7 2:1 (9-7) / (3-2)

MOC i. e Amount of Y sacrifised to gain an additional, X is increasing. PPC is concave.