This D. ... Answer. Here the slope of the production possibility curve remains constant. C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. This is because whatever be the price of Y 1 or Y 2 movement from A towards H and from B towards T will increase the total revenue. The law of increasing opportunity costs causes the production possibilities curve to: a. be a straight line b. slope upwards c. have a bowed-out shape d. shift inward. B. convex to the point of origin. There are two major differences between a budget constraint and a production possibilities frontier. It … The production possibilities curve is bow-shaped precisely because there reaches a critical point at which the produciton of less guns means the possibility for more butter, and vice versa. A production possibility frontier is a straight line when there are constant opportunity costs down the slope. 25 (b) are segments of irrational production. A straight Production Possibility Frontier (PPF) implies that the Marginal Rate of Substitution (MRS) between two products is constant — for example, producing an additional ton of soybeans always requires giving up two tons of wheat. This is because its slope is given by the relative prices of the two goods. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. have bowed-out shape. This information is represented on a curve known as Production Possibility Curve as shown below. Thus, the production possibility curve becomes linear or straight line. Whenever the production possibility curve is a straight line, opportunity cost is. This production possibility table shows the opportunity cost of each production choice. As you can see, the production possibility curve is a straight line, so opportunity cost is constant and independent of the level of production of soap and eggs. A movement along the curve represents a transfer of labor resources out of one industry and into another such that all labor remains employed. Therefore, if marginal opportunity cost remains constant then PPC will be a straight line owing to constant slope. D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced. It describes all possible quantity combinations of wine and cheese that can be achieved by the U.S. economy. Now, segments AH and BT of the production possibility curves in Fig. Since resources are scarce, increasing... See full answer below. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. [MUSIC] Why is it the case that in my general example of a production possibility frontier, I assume that it is a curve, but in this numerical example, I got a straight line. The downward slope of the PPC represents the opportunity cost concept. In contrast, the PPF has a curved shape because of the law of the diminishing returns. c. A. bility NON-LINEAR PPF AND CHANGING OPPORTUNITY COST. C. concave to the point of origin. The opportunity cost also remains constant (constant returns). Exhibit 2-3 Production possibilities curve data So the farmer must move into the segment HT if he has to maximize his profits. onstant. The MRT YX is constant or unchanged as we moved downwards the curve from left to right. 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