Advertisements
Advertisements
Question
Giving reason comment on the shape of production possibilities curve based on the following schedule:
| Good X (units) | Good Y (units) |
| 0 | 8 |
| 1 | 6 |
| 2 | 4 |
| 3 | 2 |
| 4 | 0 |
Advertisements
Solution
Marginal opportunity cost:
| Good X (units) | Good Y (units) | MOC = `"ΔY"/"ΔX"` |
| 0 | 8 | - |
| 1 | 6 | 2/1 = 2 |
| 2 | 4 | 2/1 = 2 |
| 3 | 2 | 2/1 = 2 |
| 4 | 0 | 2/1 = 2 |
The above schedule clearly states that the production of Good-X increases from Unit 1 to Unit 2, and correspondingly, the units of Good-Y forgone is 2. With each additional unit of production of Good-X, the amount of Good-Y to be forgone is constant (2). So, because of constant opportunity cost, the production possibility curve (PPC) is a downward sloping straight line.
APPEARS IN
RELATED QUESTIONS
Assuming that no resource is equally efficient in production of all goods, name the curve which shows production potential of the economy. Explain, giving reasons, its properties.
Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibilities curve.
Give the meaning and characteristics of production possibility frontier.
A large number of technical training institutions have been started by the government. State its economic value in the context of production possibilities frontier.
Giving reason, comment on the shape of Production Possibilities Curve based on the following table :
| Good X (units) | Good Y (units) |
| 0 | 20 |
| 1 | 18 |
| 2 | 14 |
| 3 | 8 |
| 4 | 0 |
Define flow variable.
Define flow variable.
What do you mean by the production possibilities of an economy?
What is a production possibility frontier?
Choose the correct alternative from given options:
In the given figure, the movement on the production possibility curve from point A to point B shows _____________.
Choose the correct alternative from given options:
Shift from Point A on Production Possibility Curve X1Y1 to point B on X2Y2 in the given figure indicates:
Fill up the blank.
A Production Possibility Curve (PPC) would be convex to the origin if the Marginal Rate of Transformation (MRT) is ___________.
Answer the following question.
Why is a Production Possibility Curve concave to the origin? Explain.
Production possibility curve slopes downwards from ______ to ______.
Which of the following statement is true:
______ shows the functional relationship between output and cost of production.
Which of the following statement is false?
