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. When the PPC is convex (bowed in), opportunity costs are decreasing.

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.

What is true of a PPC curve that is concave to the origin?

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 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.

Why PPC are not usually straight line?

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.

Can two PPC intersect each other?

Yes, two Production Possibility Curves can cross each other. … Therefore, a simultaneous change in the technologies of Good X and Y causes the final PPC to intersect the origin PPC at point E.

What is straight line 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. When the PPC is convex (bowed in), opportunity costs are decreasing.

What does a point inside the curve of a PPC indicate?

Any point inside a production possibilities curve indicates: unemployment and/or inefficiency. If an economy is producing a combination of goods that places it on the production possibilities curve, then it has: … Improvements in technology will shift the production possibilities curve outward.

What are the different reasons for the different shapes of production possibilities frontiers?

The shape of the PPF depends on whether there are increasing, decreasing, or constant costs. Points that lie on the PPF illustrate combinations of output that are productively efficient. We cannot determine which points are allocatively efficient without knowing preferences.

What does it mean when the PPC moves to the right?

When the curve shifts outward, or to the right, that means output is increasing. When the curve shifts inward, or to the left, that means output is decreasing.

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Why does PPC slopes downward to the right?

PPC curve is downward sloping from left to right. This is because the production of every additional unit of one good, more and more units of other goods has to be sacrificed.

Why does PPC slopes downward from left to right?

The downward sloping nature of the PPC is due to the law of increasing opportunity cost. According to this law, with the fuller utilisation of the given resources, in order to produce an additional unit of one good, some of the resources are to be withdrawn from the production of another good.

Why is PPC downward sloping and concave to the origin?

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 sacriced since the resources are limited and are not equally efficient in the production of both the goods.

Why is the PPF curved and not 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.

What will be the MOC of straight line PPC?

Explanation: Therefore, if marginal opportunity cost remains constant then PPC will be a straight line owing to constant slope.

Which of the following assumptions is required for a production possibilities curve to be a straight line?

PPF can be a straight line if we assume that MRT is constant, i.e. same amount of a commodity is sacrificed to gain an additional unit of another commodity. It is possible only when we assume that all the resources are equally efficient in production of all goods.

Which of the following is a major difference between a budget constraint and production possibilities frontier?

A budget constraint model shows the purchase choices that an individual or society can make given a specific budget and specific purchase prices. The production possibilities frontier shows the possible combinations of two products or services that could potentially be produced by a society.

When an economy is operating on the PPC it indicates?

Since PPC shows different combinations of two goods that can be produced when the given resources are fully and efficiently utilized and the technology for producing them remains constant, therefore, an economy operating on PPC will always indicate that potential output is equal to the actual output.

Which point on the PPC represents a situation in which resources are not being used effectively?

Point X represents an inefficient use of resources, while point Y represents a goal that the economy simply cannot attain with its present levels of resources. As we can see, in order for this economy to produce more wine, it must give up some of the resources it is currently using to produce cotton (point A).

Which of the following best explains why this PPC is bowed outward from the origin?

Which of the following best explains why this PPC is bowed outward from the origin? The resources used to produce scooters and ice cream are not interchangeable. … This increases the opportunity cost of making that good, resulting in a bowed out PPC.

When PPC is downward sloping straight line MRT would be?

(b) Since MOC/MRT is constant, PPC is downward sloping straight line. (c) Since MOC/MRT is increasing, the PPC will be downward sloping concave to the origin.

In which situation PPF shifts towards right?

1- PPF shifts towards the right when there is a fully efficient use of resources. 2- When all resources are not equally efficient in the production of both goods the there is the possibility of the Production Possibility Frontier to be a straight line. 3- Available Resources are fully and efficiently utilized.

What does straight line downward sloping PPC reveal?

Answer: PPC shows the maximum possible combination of two goods that can be produced with the available resources and technology. … Therefore the PPC sloped downards from left to right.

Why is PPC bowed outward?

Key model. The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. … The bowed out shape of the PPC in Figure 1 indicates that there are increasing opportunity costs of production.

What factors lead to rightward shift of PPC?

It may be in the form of discovery of new natural resources, availability of new machinery through saving and investment, and increase in skilled and unskilled labour through population growth. As a result more of two goods can be produced causing rightward shift of PPC.

Is PPC concave or convex?

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.

Can PPC be convex to origin?

Answer: Therefore the PPC curve can be convex to the origin when the opportunity cost decreases. This can happen only when less and less units are forgone of first commodity for the introduction of additional unit of another commodity. … This will lead the Production Possibility Curve to be convex to origin.

Why is PPF a straight line?

If opportunity costs are constant, a straight-line (linear) PPF is produced. This case reflects a situation where resources are not specialised and can be substituted for each other with no added cost.