Suppose you find a production possibilities frontier (PPF) that is shaped like a straight line....

Question:

Suppose you find a production possibilities frontier (PPF) that is shaped like a straight line. What can you determine about the production of the two goods?

a. Production of the two goods is subject to decreasing relative cost.

b. Production of the two goods is subject to increasing relative cost.

c. Production of the two goods is subject to constant opportunity cost anywhere along the PPF.

d. One producer must have an absolute advantage in production.

e. More resources will not cause the PPF to shift.

PPF:

The production possibility frontier (PPF) is a graphical representation of production technology in an economy. The frontier is curved and bowed away from the origin.

Answer and Explanation: 1

The answer is c).

If the production possibility frontier is a straight line, then the slope of the production possibility is constant. Since the slope of the production possibility frontier measures the opportunity cost of producing one good in terms of another, it follows that the opportunity cost is constant along the production possibility frontier.


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Production Possibilities Curve: Definition & Examples

from

Chapter 11 / Lesson 28
878

Understand what the production possibilities curve is, and learn how to construct and interpret a production possibilities curve along with the example.


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