question_answer

Giving reason comment on the shape of Production Possibilities Curve based on the following schedule:
Good X (units)	Good Y (units)
0	10
1	9
2	7
3	4
4	0

Answer:

The PPC would be concave in shape. This is because of the increasing opportunity cost. ?With increase each additional unit of production of good X of the amount of good Y that must be sacrificed increases. For example, as the production of good X moves from first unit to second unit, 2 units of good Y must be sacrificed (9 - 7). Further, as the production moves from second unit to third unit, the units of good Y that must be sacrificed increases to three. Thus, the opportunity cost of producing one additional unit of good X goes on increasing. This increasing opportunity cost gives rise to concave shape of PPC.