The manufacturing possibilities curve is bowed in shape because of the law of raising opportunity cost, which describes the idea the the an ext units that a product room produced, the less capacity the economy has of creating other products.
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The production Possibilities Curve represents the choice society faces concerning whether come invest resources (inputs) into developing one sort of product or business or another. The factor that this curve is bow-shaped is a direct result of the law of increasing opportunity cost. This regulation states that any time society...
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The production Possibilities Curve to represent the an option society faces concerning whether come invest sources (inputs) into producing one sort of product or organization or another. The factor that this curve is bow-shaped is a direct result of the law of boosting opportunity cost. This regulation states that any time culture decides to relocate along its production possibilities curve to develop a certain kind of an excellent or service, the opportunity expense of making additional units of that an excellent or service will increase. The reason for this increase in opportunity expense is that, once a details amount of society or financial resources are used to create a certain kind the product, they mitigate the full amount of resources easily accessible to make every little thing else. The much more resources that are provided (corresponding to a higher number of devices of the perfect product), the less qualified the economic climate is of sustaining other creates of production. At a certain point, it is no longer economically viable to continue to produce increasing numbers of a one particular good or service. The detriment it reasons to the manufacturing of other things (the opportunity cost) is also great.
In modelling the production possibilities curve, us assume that the economic climate can develop two (or more) goods and that the modern technology and components of manufacturing remain unchanged and equivalent for both. In general, the curve does no tell economists where a an especially production procedure will run most successfully (on the curve itself). Rather, it tells united state what possibilities exist within a given economy.
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I to be going to replicate right here an example detailed in Timothy Tregarthen and also Libby Rittenberg’s textbook, Economics, second Edition, to illustrate this point (pgs. 45-46). Speak we produce a manufacturing possibilities curve to graph the manufacturing of weapons vs the manufacturing of butter. The former is an instance of a defense sector good, vice versa, the last a civilian good. Speak that guns are the y-axis, butter the x-axis, and also that the curve bows exterior as we move from left to right. Together we move from left to right on the x-axis, we create less firearms and more butter. If us were to take any two point out on the curve, say suggest A and also B, v A being more to the left top top the x-axis, the opportunity cost of developing less weapons for more butter would be the number of guns at allude A minus the variety of guns at allude B. Figure 2-6 in the textbook the I have actually linked below illustrates this case well. The manufacturing possibilities curve is bow-shaped precisely because there reaches a vital point in ~ which the produciton of much less guns means the possibility for more butter, and vice versa. This function cannot be represented via a linear model.