Question

(C) Analyze the difference between a straight line and a curved production possibility frontier.

Answer 1

Solution:

(C) Difference between a straight line and a curved production possibility:

1. The main reason for a straight line production possibility frontier is that when resources are shifted from the production of one good to another, their efficiency remains the same,

Whereas in the curved production possibility frontier when resources are shifted from the production of one good to another, their efficiency either decreases or increases.

2. A straight line production possibility frontier is only of a straight-line shape on the graph,

Whereas a curved production possibility frontier can be of curved inward or curved outward shape on the graph.

3. In the straight-line production possibility frontier, the same units of a good has to sacrificed for every additional unit of another good,

Whereas in the curved production possibility frontier, for curved outward, more and more units of a good have to be sacrificed for every additional unit of another good, and for curved inward, less and less units of a good have to be sacrificed for every additional unit of another good.

4. A straight-line production possibility frontier has constant opportunity costs as their efficiency does not decline when shifted from one good to another,

Whereas a curved production possibility frontier has either increasing opportunity costs or decreasing opportunity costs as their efficiency either decreases or increases when shifted from one good to another.

5. A straight-line production possibility frontier is an imaginary situation because resources are not equally efficient in the production of all goods and services,

Whereas a curved production possibility frontier is a realistic situation because, in the real economy, resources are not equally efficient in the production of all goods and services, and when shifted from one good to another their efficiency decreases which increases the opportunity costs and results in curved outward production possibility frontier.
Also for curved outward, resources may be employed in the production of a good where they are not efficient and when shifted from one good to another good in which they are efficient and specialize, their efficiency increases and results in a curved inward production possibility frontier.

These were the differences between a straight-line and a curved production possibility frontier.