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