Question

The given shape of the PPC is attributed to ___________.

• A. increasing nature of opportunity costs
• B. decreasing nature of opportunity costs
• C. constant opportunity costs
• D. zero opportunity costs

Answer 1

Answer: (A)

increasing nature of opportunity costs

The given shape of PPC is due to increasing marginal opportunity cost which refers to the additional sacrifice that an economy makes when they shift resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a product X is produced more units of product Y are sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of the PPC.