Advertisements
Advertisements
Question
Giving reason comment on the shape of Production Possibilities curve based on the following schedule :
| Good X (units | Good Y (units) |
| 0 | 30 |
| 1 | 27 |
| 2 | 21 |
| 3 | 12 |
| 4 | 0 |
Solution
Marginal opportunity cost is as follows:
| Good X (units) |
Good Y (units) |
MOC = `"ΔY"/"ΔX"` |
| 0 | 30 | - |
| 1 | 27 | 3/1 = 3 |
| 2 | 21 | 6/1 = 6 |
| 3 | 12 | 9/1 = 9 |
| 4 | 0 | 12/1 = 12 |
The above schedule clearly states that the production of Good X increases from Unit 1 to Unit 2, and correspondingly, the units of Good Y forgone is 3. While the production of Good X increases from Unit 2 to Unit 3, 6 units of Good Y are forgone. With each additional unit of production of Good X, the amount of Good Y to be forgone increases. So, because of increasing opportunity cost, the production possibility curve (PPC) is concave to the origin.
APPEARS IN
RELATED QUESTIONS
Explain the central problem of "choice of technique".
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 |
What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat Mission) on the Production Possibilities curve of the economy and why?
What will likely be the impact of large-scale outflow of foreign capital on Production Possibilities curve of the economy and why?
Giving reason comment on the production possibilities curve based on the following schedule:
| Good X (units) | Good Y (units) |
| 0 | 20 |
| 1 | 18 |
| 2 | 14 |
| 3 | 8 |
| 4 | 0 |
What is likely to be the impact of "Make in India" appeal to the foreign investors by the Prime Minister of India, on the production possibilities frontier of India? Explain
What will likely be the impact of the large-scale inflow of foreign capital in India on Production Possibilities Curve and why?
Why is Production Possibilities Curve concave? Explain
Why is a production possibilities curve downward sloping? Explain
Explain the central problem of "What is produced and in what quantities.".
In what circumstances may the production possibility frontier shift away from the origin? Explain.
Normal profits for a firm imply that the firm is breaking even. Explain.
