Refer to the above figure. Which of the following statements is TRUE?
A) Panel A does not represent an economy that is producing efficiently while Panel B does.
B) Panel A represents an economy that has a lower level of technology than Panel B.
C) Opportunity costs do not apply to Panel A but apply to Panel B.
D) In Panel A, equal amounts of Y must be given up to obtain equal increments of X while in Panel B increasingly greater amounts of Y must be given up to obtain equal increments of X.

Question

Quizplus · Accepted Answer

In Panel A, the production possibility frontier (PPF) is a straight line, indicating constant opportunity costs for producing X and Y. In Panel B, the PPF is curved, indicating increasing opportunity costs for producing X as more of Y is given up, which aligns with the concept of the law of increasing opportunity costs.

Refer to the Above Figure