If the marginal (additional) opportunity cost is a constant then the P...
The PPC/PPF (Production Possibility Curve/Production Possibility Frontier) shows the different quantities of two goods that an economy can produce. ... A straight line PPC means that for every unit of good y relinquished, an additional unit of good x can be produced.
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If the marginal (additional) opportunity cost is a constant then the P...
Explanation:
To answer this question, we need to understand the concept of opportunity cost and its relationship with the production possibilities curve (PPC).
1. Opportunity Cost:
- Opportunity cost refers to the value of the next best alternative that is forgone when making a choice.
- It represents the trade-off between different options and the resources required to produce them.
2. Marginal Opportunity Cost:
- Marginal opportunity cost refers to the additional opportunity cost incurred when producing one more unit of a particular good.
- It measures the rate at which the production of one good must be decreased to produce more of the other good.
- If the marginal opportunity cost is constant, it means that the same amount of one good must be given up to produce each additional unit of the other good.
3. Production Possibilities Curve (PPC):
- The PPC is a graphical representation of the different combinations of goods and services that can be produced with limited resources.
- It shows the maximum attainable outputs of two goods given the available resources and technology.
- The PPC is typically concave (curved) due to the principle of increasing opportunity cost.
4. Relationship between Marginal Opportunity Cost and PPC:
- If the marginal opportunity cost is constant, it means that the trade-off between the two goods remains the same regardless of the quantity produced.
- In this case, the PPC would be a straight line because the same amount of one good can be produced by giving up an equal amount of the other good.
Therefore, the correct answer is B: straight line because a constant marginal opportunity cost implies a linear PPC.
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