The usual shape of production possibility curve is __________ towards the origin.a)Convexb)Concavec)Straight lined)A rectangular hyperbola.Correct answer is 'B'. Can you explain this answer?

Question

Answer

The principle of increasing opportunity cost makes the PPC concave to the origin

Answer

The principle of increasing 0pportunity cost makes the production possibility curve cancave to the origin .

Answer

The production possibility curve (PPC) is a graphical representation of the different combinations of two goods that an economy can produce using its limited resources and technology. It shows the maximum output that can be achieved for a given level of resources and technology.

The shape of the PPC is determined by the concept of opportunity cost. Opportunity cost refers to the trade-off or sacrifice that must be made to produce more of one good at the expense of producing less of another good. In other words, as an economy produces more of one good, it must give up some of the other good.

The usual shape of the PPC is concave towards the origin. This means that the curve is bowed outwards, with a flatter slope at the beginning and a steeper slope as we move towards the right along the curve. This concave shape is also known as the law of increasing opportunity cost.

There are several reasons why the PPC has a concave shape:

1. Law of diminishing returns: As an economy reallocates its resources from the production of one good to another, it is likely to encounter diminishing returns. This means that each additional unit of resources allocated to the production of a good will result in a smaller increase in output. Therefore, the opportunity cost of producing more of one good increases as more resources are allocated to its production.

2. Differences in resource suitability: Different goods require different types and quantities of resources for their production. Initially, an economy may allocate its most suitable resources to the production of a particular good, resulting in a relatively low opportunity cost. However, as more resources are allocated to the production of that good, less suitable resources must be used, leading to a higher opportunity cost.

3. Technological constraints: Technological constraints can also contribute to the concave shape of the PPC. Initially, an economy may have access to more efficient production techniques for one good, resulting in a lower opportunity cost. However, as more of that good is produced, the economy may need to use less efficient production techniques, leading to a higher opportunity cost.

The concave shape of the PPC reflects the fundamental economic concept of scarcity and the need to make choices. As an economy produces more of one good, it must give up increasing amounts of the other good. This concave shape highlights the trade-offs and opportunity costs involved in production decisions.

Answer

The usual shape of PPC is concave towards the origin because the oppurtunity cost of producing a good increases when we produce more of that good.

Answer

Ppc curve is always concave to the origin because of increasing marginal rate of transformation(MRT) i.e more and more units of one commodity is sacrificed to gain an additional unit of another commodity.

Answer

It is concave to the origin because the resources available are not perfect substitute of each other which results in increasing opportunity cost.

Answer

PPC is concave to the point of origin because of rising marginal opportunity cost. MOC rise because the resources are not equally efficient in the production of all goods and services. when they are shifted from Use 1to Use 2 their specialisation disturbs and loss rises.

Similar CA Foundation Doubts

What will be the shape of Production Possibility Curve (PPC) when marginal opportunity cost is constant?

A 10% increase in the price of a good causes a 10% decrease in quantity supplied. The supply curve is a _______.

Explain the concept of production possibility curve?

An indifference curve is always

When two goods are perfect substitute for each other

Top Courses for CA FoundationView all

Quantitative Aptitude for CA Foundation

Principles and Practice of Accounting

Business Laws for CA Foundation

Business Economics for CA Foundation

Mock Tests & Past Year Papers for CA Foundation

Top Courses for CA Foundation

Top Courses for CA Foundation

Suggested Free Tests

Related Content

CA Foundation Courses

Other Courses

How To Prepare?

Other Exams

Company