Question

If a production possibilities frontier appears as a downward sloping straight line, which of the following occurs?

a) Negative opportunity cost
b) Increasing opportunity cost
c) Decreasing opportunity cost
d) Constant opportunity cost

Answer 1

The correct answer is option d.

Step-by-step explanation:

A production possibility curve shows the different bundles of two goods that can be produced using all the resources and technology available.

The slope of the curve represents the opportunity cost of producing a good.

We cannot increase the production of both goods, so we need to sacrifice one good if we want to increase the production of the other.

A straight line downward sloping frontier means that the opportunity cost of production is constant. This means that the resources are perfectly substitutable in the production of two goods. So throughout the production process, the marginal opportunity of producing each additional unit will remain constant.