Question

A straight line possibilities frontier indicates that

Answer 1

Before going to the actual answer, let me explain what a production possibility frontier means:

The production possibility frontier(PPF) is a curve which depicts all the possibilities of generating maximum output for two goods, with given set of inputs which consists resources required to produce and other factors. The main assumption in PPF is that all the inputs are used efficiently. The PPF is also known as the transformation curve or production possibility curve. Factors such as capital, labor, and technology affect the resources available, which affect the position of the production possibility curve, i.e., where it lies.
PPF shows the phenomenon of scarcity of resources. Manufacturing more of one product, affects the production of the other. In order to raise the production of one item, we need to transfer the resources which are meant for another item.
Each point on the PPF represents a combination of two goods that an economy can produce using the available resources.

The most common shape of PPF is concave to the origin, which indicates that the opportunity cost of producing one good increases as the production of that good is increased. However, there exist a straight line PPF and convex PPF as well.
As it is asked in the question, the straight line PPF indicates that, the opportunity cost of producing the goods is same. In this case, the resources are not specialized only for one product, they can be used for both products and these resources can be substituted for each other without any additional cost. The products which require similar or same kind of resources (bread and pastry) would have almost straight line PPF, which indicate constant opportunity cost. There is another shape for PPF, that is convex to the origin, this happens when the opportunity cost of producing one good falls as more and more of that good is produced.