D) convex to the origin. Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost. Student videos. Which statements about the Production Possibilities Frontier are true? That is, as we move down along the PPC, the opportunity cost increases. Definition: The Production Possibilities Curve, also known as the production possibilities frontier, is a graph that shows the maximum number of possible units a company can produce if it only produces two products using all of its resources efficiently. Opportunity costs and the law of increasing opportunity costs are illustrated by a production possibility frontier (PPF) or a production possibility curve (never a straight line). The slope of the production possibilities curve is the opportunity cost of the good measured on the horizontal axis, which in this example is storage sheds. The productive resources of the community can be used for the production of various alternative goods. If society initially favours car production over airplanes so that we are located in the southeast portion of the frontier, workers become skilled in car production. Introduction to Economics - 60 Second Challenge (Knowledge Retrieval Activity) Learning Activities. Because resources are scarce, society faces tradeoffs in how to allocate them between different uses. Production Possibilities Curve And Increasing Opportunity Costs; Production possibilities and a change in resources; Decisions Today Impact On Our Future ; Production Possibilities Curve and Scarcity. Because it best reflects the economy, it is the one most commonly seen throughout the study of economics. The production possibility curve portrays the cost of society's choice between two different goods. SECURITY: Indicates by point F that lies outside the curve. Opportunity cost is best defined as: A) the monetary price of any productive resource. A professor hires two aides, assigning them the tasks of reading student papers and of typing lecture notes on a computer. A production possibilities curve is bowed out, indicating increasing opportunity cost because of. b. distance to the curve from the horizontal axis. The production possibilities curve is bowed in shape because of the law of increasing opportunity cost, which explains the idea that the more units of a … Production Possibilities Curve – a graph that shows alternative ways to use an economy’s resources – does not show consumer satisfaction. Explain that a production possibilities curve (production possibilities frontier) model may be used to show the concepts of scarcity, choice, opportunity cost and a situation of unemployed resources and inefficiency. If opportunity costs did not increase, PPCs would be straight lines. This comes about as you reallocate resources to produce one good that was better suited to produce the original good. The law of increasing opportunity costs is reflected in a production possibilities curve that is: A) an upsloping straight line. Lesson 5: The law of increasing opportunity cost: As you increase the production of one good, the opportunity cost to produce the additional good will increase. If the firm increase the production of goods 100 units, then the firm need to decrease the production of services 0 units. It is a m odel of a macro economy used to analyze the production decisions in the economy and the problem of scarcity. This happens when resources are less adaptable when moving from the production of one good to the production of another good. The law of increasing opportunity cost states that the opportunity cost of producing a good increases as more of the good is produced. Because of increasing opportunity costs, the production possibility curve: a. is bowed out from (or concave to) the origin b. can be either downward- or upward-sloping Central Problems of An Economy, Production Possibility Curve and Opportunity Cost 1 ... Ans. This situation is caused by the specialization of workers. Production Possibility Curve (PPC) is concave to the origin because marginal opportunity cost of shifting resources from commodity Y to commodity X tends to rise. The production possibility curve represents graphically alternative produc­tion possibilities open to an economy. Production possibility curve illustrate the real choices and trade-offs that countries face. Production possibility curve A shows increasing opportunity cost which can be seen at between point AB and Point CD, to increase the production of butter by 10, the quantity of guns needed to be reduced by 5 but as going down the curve like point C and D, to increase the production of butter by 10, the production of 50 guns need to be reduced. If production for this economy moved from point A to point B the production of corn would increase from 20 tons to 35 tons. But those extra 15 tons (35-20) of corn are not free. An economy that operates at the frontier has the highest standard of living it can achieve, as it is producing as much as it can using the same resources. To figure out the opportunity cost of a given change in production just check the axes and do the math. Because of increasing opportunity costs, the production possibility curve:a. is bowed out from (or concave to) the originb. can be either downward- or upward-slopingc. What is the definition of production possibility curve? In this case the economy foregoes increasing amounts of one good when producing more of the other. d. All of these are true. The shape of the production possibilities curve (PPC) is caused by the law of increasing opportunity costs. On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the: a. distance to the curve from the vertical axis. A production possibilities curve is 'bowed out,' or concave to the origin, because of: a. competition b. increasing opportunity cost/diminishing returns Marginal opportunity cost tends to rise because the factors of production are not perfect substitute of each other. In business analysis, the production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources. c. movement along the curve. 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