Question

"The PPC is concave to the origin and slopes downward." Which of the following statements is correct?
(i) This statement is absolutely correct
(ii) This statement is absolutely incorrect
(iii) This statement indicates increasing opportunity cost
(iv) This statement indicates production of one good is sacrificed for the production of other goods.

• A. i only
• B. ii only
• C. i and iii only
• D. i, iii and iv only

Answer 1

The correct option is D i, iii and iv only

• PPF slopes downward to indicate the fact that production of one good is sacrificed for the production of other goods. Given the inputs and technology, an economy can increase production of one good only by reducing the production of other good.
  
• PPF is concave to the origin which reflects increasing opportunity cost i.e. as one moves downward on the PPF, the amount of production of one good that needs to be sacrificed so as to increase the production of the other good.