Why Is the PPF Often Curved Instead of Straight? The curved shape reflects the law of diminishing returns . This law states that there comes a point where an added production factor has less of an impact. For example, adding additional resources toward the production process may initially result in fairly large gains.
Why is the production possibilities frontier curved and not linear?
Its always drawn as a curve and not a straight line because there a cost involved in making a choice i.e when the quantity of one good produced is higher and the quantity of the other is low . This is known as opportunity cost.
Why is a production possibility frontier curved?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape because of the law of the diminishing returns . The second is the absence of specific numbers on the axes of the PPF.
Why is a production possibility frontier curved quizlet?
maximum possible combinations of two goods that country can produce in a specified period time with all of its resources fully and efficiently used. opportunity cost forumla. why are PPFs curved? in the long run, a PPF can move outwars – when the PPF moves outwards, it means that the economy can produce more output .
Why is PPC concave?
Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost . As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. ... This confirms the concave shape of PPC.
What is the typical production possibilities curve?
The typical production possibilities curve is: a downward sloping line which is concave to the origin .
Who introduced production possibility curve?
The concept that came to be known as the production possibilities curve was first outlined by the Austrian-born American economist Gottfried von Haberler (1900-95).
Why is production possibility curve concave Class 11?
Production Possibility Curve is concave to the origin because to produce each additional unit of good X, more and more unit of good Y is to be sacrificed . Opportunity cost of producing every additional unit of good A tends to increase in terms of the loss of production of good Y.
What is production possibility curve with example?
For example, say an economy produces 20,000 oranges and 120,000 apples . On the chart, that's point B. If it wants to produce more oranges, it must produce fewer apples. On the chart, Point C shows that if it produces 45,000 oranges, it can only produce 85,000 apples.
What happens when production is inside the production possibilities curve quizlet?
A point lying inside the production possibilities curve indicates underutilization, unemployment, or inefficient use of resources : more goods and services could be produced by using the limited resources more fully and efficiently.
What does a production possibilities frontier show quizlet?
What is the Production Possibilities Frontier (PPF)? a graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology.
Can a PPC be upward sloping?
1 Expert Answer
No , When you exand production of one good you must reduce production of some other good in order to produce it.
Can a PPC line be straight?
A PPC curve can be a straight line only if the marginal rate of transformation (MRT) is constant throughout the curve . A MRT can remain constant only if both the commodities are equally constant and the marginal utility derived from their production is also constant.
Is equal to slope of PPC?
The slope of any PPC equals the marginal cost of producing x , so if the slopes of the two PPC's are equal, then A's marginal cost of producing x is equal to B's marginal cost, and production is efficient.
What does a point below the production possibility frontier indicate?
Points that lie strictly below the frontier/curve are inefficient , because the economy can produce more of at least one good without sacrificing the production of any other good, with existing resources and technology. Points that lie on the frontier/curve are efficient.
