Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 3 - Part I - Interdependence and the Gains from Trade - Questions for Review: 1

Answer

A Production Possibilities Frontier (PPF) which is linear rather than curved indicates that the opportunity cost is constant.

Work Step by Step

Generally, the Production Possibilities Frontier (PPF) is bowed outwards due to the law of diminishing returns. For most pairs of products, an entity will be better at producing one than the other. It is for this reason that specialization tends to be encouraged. However, a linear PPF indicates that the opportunity cost is constant at every point on the curve. This curve does not move outwards at all because as you move along the curve, the costs of production do not increase.
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