Suppose you find a production possibilities frontier (PPF)that is shaped like a straight line.What can you determine about the production of the two goods?
A) Production of the two goods is subject to decreasing relative cost.
B) Production of the two goods is subject to increasing relative cost.
C) Production of the two goods is subject to constant opportunity cost anywhere along the PPF.
D) One producer must have an absolute advantage in production.
E) More resources will not cause the PPF to shift.

Question

Quizplus · Accepted Answer

A straight line PPF indicates that the opportunity cost of producing one good in terms of the other is constant, which means that there is no increasing or decreasing relative cost. Therefore, the best choice is C. Option A and B are incorrect as they refer to decreasing or increasing opportunity cost as opposed to being constant. Option D is not relevant, as it states an absolute advantage and not a PPF. Option E, stating that more resources will not cause the PPF to shift, is not necessarily true, as it depends on whether the additional resources are equally suitable for both goods or only for one.

Suppose You Find a Production Possibilities Frontier (PPF)that Is Shaped