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For a farmer increasing sacrifice of potatoes for each unit of onions will produce _______ shape of his PPC.
- a)Concave
- b)Hyperbola
- c)Straight
- d)Convex
Correct answer is option 'A'. Can you explain this answer?
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For a farmer increasing sacrifice of potatoes for each unit of onions ...
Marginal ooportunity cost is defined as the amount of one good that needs to be given up in order to increase the production of the other good by one unit. It is calculated as Units of good one sacrificed/ units of the other good obtained. PPC is concave to origin because marginal opportunity cost increase due to law of diminshing returns.
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For a farmer increasing sacrifice of potatoes for each unit of onions ...
Effect of Increasing Sacrifice of Potatoes for Onions on PPC Shape:
Increasing the sacrifice of potatoes for each unit of onions will result in a concave shape of the Production Possibility Curve (PPC).
Explanation:
1. Law of Increasing Opportunity Cost:
- The concave shape of the PPC is a result of the law of increasing opportunity cost. This law states that as a producer shifts resources from producing one good to another, the opportunity cost of producing the second good increases.
2. Trade-offs:
- In this case, as the farmer increases the sacrifice of potatoes (one good) for each unit of onions (second good), the resources that are better suited for producing potatoes are now being used to produce onions. This leads to a decrease in the efficiency of producing onions, resulting in a higher opportunity cost for each additional unit of onions produced.
3. Concave Shape:
- The concave shape of the PPC reflects this increasing opportunity cost. As the farmer produces more onions and fewer potatoes, the PPC will be bowed outward, indicating that resources are not easily adaptable between the two goods and that the opportunity cost of producing onions is rising.
In conclusion, the farmer will observe a concave shape of his PPC as he increases the sacrifice of potatoes for each unit of onions, reflecting the increasing opportunity cost of producing onions.
Increasing the sacrifice of potatoes for each unit of onions will result in a concave shape of the Production Possibility Curve (PPC).
Explanation:
1. Law of Increasing Opportunity Cost:
- The concave shape of the PPC is a result of the law of increasing opportunity cost. This law states that as a producer shifts resources from producing one good to another, the opportunity cost of producing the second good increases.
2. Trade-offs:
- In this case, as the farmer increases the sacrifice of potatoes (one good) for each unit of onions (second good), the resources that are better suited for producing potatoes are now being used to produce onions. This leads to a decrease in the efficiency of producing onions, resulting in a higher opportunity cost for each additional unit of onions produced.
3. Concave Shape:
- The concave shape of the PPC reflects this increasing opportunity cost. As the farmer produces more onions and fewer potatoes, the PPC will be bowed outward, indicating that resources are not easily adaptable between the two goods and that the opportunity cost of producing onions is rising.
In conclusion, the farmer will observe a concave shape of his PPC as he increases the sacrifice of potatoes for each unit of onions, reflecting the increasing opportunity cost of producing onions.
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For a farmer increasing sacrifice of potatoes for each unit of onions will produce _______ shape of his PPC.a)Concaveb)Hyperbolac)Straightd)ConvexCorrect answer is option 'A'. Can you explain this answer?
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