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. This production possibility table shows the opportunity cost of each production choice. NON-LINEAR PPF AND CHANGING OPPORTUNITY COST. B. convex to the point of origin. Exhibit 2-3 Production possibilities curve data [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. It specifies the alternative outputs that can be achieved with different levels of inputs. The downward slope of the PPC represents the opportunity cost concept. Therefore, if marginal opportunity cost remains constant then PPC will be a straight line owing to constant slope. onstant. Thus, the production possibility curve becomes linear or straight line. 25 (b) are segments of irrational production. In contrast, the PPF has a curved shape because of the law of the diminishing returns. a straight line. The MRT YX is constant or unchanged as we moved downwards the curve from left to right. 24 (b) and Fig. have bowed-out shape. The first is the fact that the budget constraint is a straight line. So the farmer must move into the segment HT if he has to maximize his profits. This information is represented on a curve known as Production Possibility Curve as shown below. The straight downward-sloping line is the production possibility frontier. C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. A production possibility frontier is a straight line when there are constant opportunity costs down the slope. 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 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. 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. Since resources are scarce, increasing... See full answer below. It describes all possible quantity combinations of wine and cheese that can be achieved by the U.S. economy. 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. D. ... Answer. C. concave to the point of origin. 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. The opportunity cost also remains constant (constant returns). 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 It … Now, segments AH and BT of the production possibility curves in Fig. There are two major differences between a budget constraint and a production possibilities frontier. A movement along the curve represents a transfer of labor resources out of one industry and into another such that all labor remains employed. Here the slope of the production possibility curve remains constant. Whenever the production possibility curve is a straight line, opportunity cost is. c. 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