Question

Giving reason comment on the shape of Production Possibilities curve based on the following schedule:

Good X (units)	Good Y (units)
0	16
1	12
2	8
3	4
4	0

Answer 1

Marginal opportunity cost is as follows:

Good X (units)	Good Y (units)	MOC = `"ΔY"/"ΔX"`
0	16	-
1	12	4/1 = 4
2	8	4/1 = 4
3	4	4/1 = 4
4	0	4/1 = 4

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 4. With each additional unit of production of Good-X, the amount of Good-Y to be forgone is constant (4). So, because of constant opportunity cost, the production possibility curve (PPC) is a downward sloping straight line.