In which way does a straight line PPC differ from a concave PPC? When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve.
What is the difference between a straight line and PPC curve?
(C) A straight line production possibilities curve has an increasing opportunity cost. (D) A straight line production possibilities curve does not show opportunity cost. (E) There is no difference between the two production possibilities curves. See notes from Class #3. A straight line PPC indicates a constant trade-off between two products.
Why is the PPC curve concave to the origin?
Why is the PPC curve concave? Answer: PPC is concave to the origin because of increasing Marginal opportunity cost. This is because inorder to increase the production of one good by 1 unit more and more units of the other good have to be sacrificed since the resources are limited and are not equally efficient in the production of both the goods.
What is the shape of PPC in economics?
One may also ask, what is the shape of PPC and why? a typical PPC usually makes a bow out (or concave) shape from the original. This indicates an Increasing Opportunity Cost, meaning that the more you produce Item A, the Opportunity Cost of Item B increases, whereas in the linear graph it was constant.
Why is the PPF curve not a straight line?
Why is the PPF curved and not straight? 1 Answer. 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.
In which way does a straight line production possibilities curve differ from a concave?
When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.
What is the difference between a production possibilities curve and a production possibilities frontier?
The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology. Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.
What is the difference between increasing opportunity cost and constant opportunity cost?
Constant costs imply that all resources are of equal quality and that they are all equally suited to the production of both commodities. Increasing opportunity costs mean that for each additional unit of G produced, ever-increasing amounts of D must be given up.
How is the law of increasing opportunity cost reflected in the shape of the production possibilities curve?
The bowed-out shape of the production possibilities curve illustrates the law of increasing opportunity cost. Its downwards slope reflects scarcity.
Why is a production possibilities frontier typically drawn as a curve rather than a straight line?
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 shape of the production possibilities frontier often curved instead of straight?
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.
When can PPC be a straight line?
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.
Why is the PPC curve concave?
PPC is concave shaped because of increasing marginal rate of transformation. It implies that more and more units of commodity sacrificed to gain an additional unit of another commodity. PPC is convex shaped because of decreasing marginal rate of transformation.
What does concavity of PPC indicate?
Answer: convativy of ppc indicates increasing marginal opportunity cost. when we increase in the production of one commodity then we have to sacrifice another commodity due to limited resources. ocabanga44 and 6 more users found this answer helpful.
How do the factors of production affect the shape of the PPF curve?
Outward or inward shifts in the PPF can be driven by changes in the total amount of available production factors or by advancements in technology. If the total amount of production factors like labor or capital increases, then the economy is able to produce more goods at any point along the frontier.
What would it mean to an economy if a PPF were curved instead of straight?
What would it mean to an economy if a PPF were curved instead of straight? The tradeoffs in that economy would not be the same at every point on the curve. What does every point outside a PPF represent. an unattainable production possibility. When a country's economy grows, what happens to a PPF?
What is the economic reason for a bowed outwards concave shape of the above PPF?
The short answer is: increasing opportunity cost. The PPF is bowed outward because resources are not all equally productive in all activities. People with many years of experience working for Starbucks are good at producing lattes but not very good at producing sandwiches.
Why is PPC concave?
Answer: PPC is concave to the origin because of increasing Marginal opportunity cost. This is because inorder to increase the production of one good by 1 unit more and more units of the other good have to be sacrificed since the resources are limited and are not equally efficient in the production of both the goods.
What is the shape of PPC?
Also Know, what is the shape of PPC and why? a typical PPC usually makes a bow out (or concave) shape from the original. This indicates an Increasing Opportunity Cost, meaning that the more you produce Item A, the Opportunity Cost of Item B increases, whereas in the linear graph it was constant.
Why is the production possibility curve concave?
Answer and Explanation: The Production Possibility Curve (PPF) is concave to the origin because, to increase the production of one good say, Good X, more and more units of. Why is the PPF curved and not straight? 1 Answer. 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 ...
Why is the opportunity cost always drawn as a curve and not a straight line?
1 Answer. 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.