A PPC can be a straight line due to which of the followinga)Increasing...
A PPC curve can be a straight line only if the marginal rate of transformation is constant throughout the curve. A MRT can remain constant only if both the commodities are equally constant and marginal utility derived from their production is also constant.
View all questions of this test
A PPC can be a straight line due to which of the followinga)Increasing...
PPC is usually concave to the origin due to increase in marginal opportunity cost. but in case of constant MRT it becomes as a straight line implying no opportunity cost.
A PPC can be a straight line due to which of the followinga)Increasing...
Constant Marginal Opportunity Cost is the correct answer because it is the only condition that allows for a straight line PPC (Production Possibility Curve). Let's break down each option to understand why.
a) Increasing Marginal Rate of Substitution: This refers to the rate at which one good can be substituted for another along the PPC. If the marginal rate of substitution is increasing, it means that more and more of one good must be given up to obtain additional units of the other good. In this case, the PPC would be concave (curved) because the opportunity cost of producing more of one good increases as we move along the curve. Therefore, this option does not lead to a straight line PPC.
b) Constant Marginal Rate of Substitution: If the marginal rate of substitution is constant, it means that the same amount of one good can be substituted for another at any point along the PPC. This condition does not necessarily lead to a straight line PPC because other factors, such as constant marginal opportunity cost, need to be considered. Therefore, this option is not the correct answer.
c) Decreasing Marginal Opportunity Cost: This refers to the decrease in the opportunity cost of producing one good as more of the other good is produced. In this case, the PPC would be concave (curved) because the opportunity cost of producing more of one good decreases as we move along the curve. Therefore, this option does not lead to a straight line PPC.
d) Constant Marginal Opportunity Cost: This is the condition that allows for a straight line PPC. It means that the opportunity cost of producing one good remains constant as more of the other good is produced. In other words, the resources used to produce the goods are perfectly adaptable and can be easily reallocated without any change in the opportunity cost. This leads to a constant slope (straight line) on the PPC. Therefore, this option is the correct answer.
In conclusion, the only condition that can result in a straight line PPC is constant marginal opportunity cost. This means that the opportunity cost of producing one good remains constant as more of the other good is produced.
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.