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Question
The typical production possibilities curve is:
The typical production possibilities curve is:
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Solution
The correct option is C A downward sloping line that is concave to the origin.
The slope of
production possibility curve is marginal opportunity cost which refers to the
additional sacrifice that a firm 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 commodity is produced
more units of the other commodity is sacrificed that results in increasing
marginal opportunity cost which leads to the concave shape of PPC which is downward sloping due to the inverse relationship between both the variables.
The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm 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 commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of PPC which is downward sloping due to the inverse relationship between both the variables.
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