Question

Which of the following statements are incorrect about the Production Possibility Frontier (PPF)?

(i) It slopes upwards as an increase in the production of one good requires an increase in production of the other.
(ii) It shows the maximum available possibilities.
(iii) An outward shift in PPF means that the economy can produce more of both commodities, which was not possible earlier.
(iv) It is concave shaped due to decreasing marginal rate of transformation.
(v) It will rotate when there is no change in productive capacity concerning both the goods.

Alternatives: 

Options

• (i), (iv) and (v)

• (ii) and (iii)

• (i), (ii) and (iv)

• None of these

Answer 1

(i), (iv) and (v)

Explanation:

(i) is incorrect because PPF slopes downwards, as increasing the production of one good requires sacrificing some units of the other good.

(iv) is incorrect because PPF is concave to the origin due to increasing Marginal Rate of Transformation (MRT), not decreasing MRT.

(v) is incorrect because PPF rotates when the productive capacity of one good changes relative to the other. If there is no change in productive capacity for either good, PPF remains unchanged.