Question

If production possibility frontier (PPF) exhibits diminishing marginal product, the slope of the PPF shows which of these characterists?

• A. It becomes flatter as the quantity of input is increased.
• B. It assumes the shape of a hyperbola as the quantity of one input is increased.
• C. It becomes more steep with increases in quantity of input.
• D. May take any of the above three forms.

Answer 1

The correct option is A It becomes flatter as the quantity of input is increased.

Since the slope of the PPF becomes flatter it illustrates that as more units of labour are transferred to the production of one good by removing them from the production of the other the marginal gain in productivity due to the movement of labour reduces as the amount of labour transferred increases.