Below is a picture of a production possibilities curve that shows two products Professor Colander (your textbook author) might produce during any given day. Does this PPC illustrate the principle of increasing marginal opportunity cost? Explain.

Question

Below is a picture of a production possibilities curve that shows two products Professor Colander (your textbook author) might produce during any given day.  Does this PPC illustrate the principle of increasing marginal opportunity cost? Explain.

Quizplus · Accepted Answer

The Answer is This PPC does not illustrate the principle of increasing marginal opportunity cost. To see why not, think about moving along the PPC from points A to B and then from points B to C. For a movement from A to B, the opportunity cost of notes is 1 lecture. For a movement from B to C, the opportunity cost of notes is also 1 lecture. Thus this PPC illustrates a constant opportunity cost. This example demonstrates that the nature (or type) of opportunity cost is directly related to the shape of the PPC.

Below Is a Picture of a Production Possibilities Curve That