Question

A concave PPC implies _______.

• A. increasing marginal cost.
• B. increasing marginal opportunity cost
• C. decreasing marginal opportunity cost
• D. constant marginal opportunity cost

Answer 1

The correct option is B increasing marginal opportunity cost

The slope of production possibility curve is the marginal opportunity cost which refers to the additional sacrifice that an economy must make when it shifts resources and technology from production of one commodity to the other. Since resources are use specific, therefore each time an additional unit of a commodity is produced larger quantity of the other commodity is sacrificed. This results in increasing marginal opportunity cost which leads to the concave shape of PPC owing to increasing slopes.