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| 1. |
Why is production possibilities curve concave ? Explain. |
| Answer» Solution :A typical downwards sloping PP curve is concave, i.e, its SLOPE is increasing as we move from left to right. It also means that MARGINAL rate of transformation (MRT) increases as we move downwards along the curve. The curve is based on the assumption that no resource is equally efficient in production of all goods. MRT increases because in order to produce more and more units of one goods each TIME the quantity of the other GOOD is sacrificed at an increasing rate. | |