Which of the following statements is true about production-possibility curves?
A)Constant cost production-possibility curves are straight lines and usually lead to complete specialization under free trade.
B)Under free trade, bowed-out production-possibility curves are associated with partial specialization, because the opportunity cost of producing each good is constant along the curve.
C)Increasing cost production-possibility curves provide us with information about the preferences of the consumers.
D)Constant cost production-possibility curves are convex to the origin.

Question

Quizplus · Accepted Answer

Constant cost production-possibility curves are straight lines because the opportunity cost of producing one good in terms of the other remains constant. This often leads to complete specialization in the production of one good over the other under conditions of free trade, as countries will specialize in producing the goods for which they have a comparative advantage.

Which of the Following Statements Is True About Production-Possibility Curves