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| 1. |
Giving reason comment on the shape of Production Possibilities Curve based on the following schedule : `{:("Good X (units)","Good Y (units)"),(0,10),(1,9),(2,7),(3,4),(4,0):}` |
| Answer» The PPC would be concave in shape. This is because of the increasing opportunity cost. With increase each additional unit of production of good X of the amount of good Y that must be sacrificed increases. For example, as the production of good X moves from first unit to second unit, 2 units of good Y must be sacrificed (9-7). Further, as the production moves from second unit to third unit, the units of good Y that must be sacrificed increases to three. Thus, the opportunity cost of producing one additional unit of good X goes on increasing. This increasing opportunity cost gives rise to concave shape of PPC. | |