ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A straight line production possibilities curve does not show opportunity cost.
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A straight line production possibilities curve has an increasing opportunity cost.
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There is no difference between the two
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A straight line production possibilities curve has a constant opportunity cost.
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A straight line production possibilities curve has a decreasing opportunity cost.
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Detailed explanation-1: -Each curve has a different shape, which represents different opportunity costs. The bowed out (concave) curve represents an increasing opportunity cost, the bowed in (convex) curve represents a decreasing opportunity cost, and the straight line curve represents a constant opportunity cost.
Detailed explanation-2: -The straight-line production possibility curve indicates that the two variables are constant, i.e. goods x and y. It suggests that the resources used for the production of both goods can be substituted for another and remain equal.
Detailed explanation-3: -We know approximate amount of resources in the economy and it is not always possible to tell the exact amount of resources required for production of good. So due to difference it creates curve instead of a straight line.
Detailed explanation-4: -Terms in this set (4) What does a bowed-outward PPF represent? A straight-line PPF represents constant opportunity costs between two goods. For example, for every unit of X produced, one unit of Y is forfeited. A bowed-outward PPF represents increasing opportunity costs.