Concept of Production Possibility Curve

It gives us the maximum limit of goods and services that could be produced. So, it is also known as the production possibility boundary or production possibility frontier (PPF).

• It is downward sloping from left to right and concave to the point of origin.

 Production Possibility Curve is concave-shaped due to increasing MRT, i.e., to produce every additional unit of a commodity, more and more units of another commodity are sacrificed.

 {Reason for increasing MRT: Resources are not equally efficient}

In the given table, it is shown that, for having agricultural goods, we have to sacrifice some units of capital goods.

 Initially, when we move from combination A to B to gain one unit of agricultural goods, we have to sacrifice one unit of capital goods. Further, if we have to gain one more unit of agricultural goods, then we will have to sacrifice two, three, four, and five Units of capital goods, respectively.

 In the schedule, it is shown that, for every additional unit of agricultural goods, the marginal opportunity cost (in terms of loss of output of capital goods to the gain of agricultural goods) tends to rise.

• Growth of resources
• Improvement in technology

a) True

b) False

a) Gain – loss

b) Loss × Gain

c) Loss/Gain

d) Gain/Loss

2. c) Loss/Gain

3. Production possibility frontier/PPC

4. Rightward

5. Unattainable combination