Sia
Question
Macroeconomics
Posted 6 months ago
The graph below shows the PPC for a country producing ice cream and frozen yogurt.
A production possibilities curve
What statement explains why the PPC for ice cream and frozen yogurt is a straight line instead of a curve?
Choose 1 answer:
(A) The shape of the PPC signifies that the resources needed to produce the two goods are interchangeable.
(B) The shape of the PPC signifies that the resources needed to produce the two goods are very different.
(c) The shape of the PPC signifies increasing opportunity cost
(D) The shape of the PPC signifies an inefficient use of resources
(E) The shape of the PPC signifies efficient use of resources
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Answer from Sia
Posted 6 months ago
Solution
a
Interchangeable Resources: The straight line PPC signifies that the resources needed to produce ice cream and frozen yogurt are interchangeable. This means that the opportunity cost of producing one good in terms of the other is constant
Answer
(A) The shape of the PPC signifies that the resources needed to produce the two goods are interchangeable.
Key Concept
Interchangeable Resources
Explanation
The straight line of the PPC indicates that the opportunity cost remains constant as production shifts between ice cream and frozen yogurt. This implies that the resources used to produce these goods can be easily substituted for one another without changing the opportunity cost.
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