As we move to the right on a bowed outward production possibilities frontier, we see: a)...

As we move to the right on a bowed outward production possibilities frontier, we see:

		a) increasing labor productivity
		b) decreasing labor productivity
		c) increasing opportunity cost
		d) decreasing opportunity cost

Solutions

Expert Solution

Hello!

The answer to this question is (C) increasing opportunity cost.

The production possibility frontier is a graph showing all the production possilities or production combinations of two goods (assumption) that can be carried out from optimal usage of current resources at a given level of technology. This frontier is bowed outwards because of the law of increasing opportunity cost. A PPF is bow shaped when it is assumed that the workers have different opportunity cost of producing one good in terms of other due to difference in skills and productivity related to different goods. This means that while a worker might produce cheese efficiently in an economy but is inefficient in producing guns due to the lack of particular skill set. Therefore, as we move to the right of a outward bowed PPF, we see that the oppotunity cost of producing one more unit of good X (on x-axis) in terms of good Y (on y-axis) increases as more and more units of good Y have to be forgone to produce one more unit of good X. Each extra production of good X is taking place when more and more workers are shifted from good Y to good X. This increases inefficieny and hence increased opportunity cost.

I hope you understood! :)

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

A country's production possibilities curve is bowed outward from the origin. This is caused by the...

A country's production possibilities curve is bowed outward from the origin. This is caused by the concept known as A. The law of increasing returns B. Ockham's Razor C. The law of increasing opportunity costs D. The law of diminishing costs LEARN

Increasing opportunity cost along a bowed-out production possibilities frontier occurs because?

Explain the relationship between the bowed-out shape of the production possibilities frontier and the increasing opportunity...

Explain the relationship between the bowed-out shape of the production possibilities frontier and the increasing opportunity cost of a good as more of it is produced? (Minimum 150 words) (3 points) What is the difference between quantity demanded and demand? Explain the factors that change the demand. (Minimum 150 words) (5 points)

Explain five ways we can move outside the current production possibilities frontier

what is the cause of the production possibilities frontier to shift to the right?

8. Outward shifts of the U.S. production possibilities frontier can be caused by Group of answer...

8. Outward shifts of the U.S. production possibilities frontier can be caused by Group of answer choices human actions such as wars and environmental pollution. advances in technology and increases in human capital (education). natural disasters such as earthquakes, hurricane, floods and epidemics. the discovery and development of new sources of raw materials in Brazil, Canada, or Russia. increasing the current production of consumption goods and decreasing the current production of capital goods. 1. In Question 8, mutual gain would...

Using a linear production possibilities frontier, demonstrate how we can “price” the production of one product...

Using a linear production possibilities frontier, demonstrate how we can “price” the production of one product in terms of another for a country. Compare the opportunity cost of the product in terms of another product. How can we compare the opportunity cost of production of a good from one country to another? Explain.

Draw a production possibilities frontier for the production of food and clothing. On the graph, identify...

Draw a production possibilities frontier for the production of food and clothing. On the graph, identify (by shading and labelling) the area of feasible outcomes and the area of infeasible outcomes. Now find an efficient point “A” and an inefficient point “B”. Explain why “B” is inefficient

What are the main ideas that are explained by the Production Possibilities Frontier Model?

Answer these questions and then refer to the production possibilities frontier (PPF) as an example: a....

Answer these questions and then refer to the production possibilities frontier (PPF) as an example: a. What is an economic model? b. What role do models play in economic analysis? c. What is the largest potential problem with models?

Subjects