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What does a production possibilities frontier that is a downward-sloping straight line imply?

1) A constant opportunity cost
2) Increasing opportunity cost
3) Decreasing opportunity cost
4) No opportunity cost

User Chris Lamb
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1 Answer

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Final answer:

A downward-sloping straight line PPF implies a constant opportunity cost, which means as you shift production from one good to another, the loss and gain of the goods are always the same.

Step-by-step explanation:

A production possibilities frontier (PPF) that is a downward-sloping straight line implies a constant opportunity cost. This is because, as production is shifted from one good to another, the decrease in the output of the first good and the increase in the output of the second good are always the same. The linear PPF is an oversimplified model since it assumes that the contribution of additional workers to output does not change as the scale of production changes. This straight line model simplifies calculations and illustrates economic concepts such as absolute and comparative advantage, despite being less realistic. The law of increasing opportunity cost, which is more commonly observed in real-world scenarios, suggests a concave PPF curve, where opportunity costs increase as one moves along the curve.

User Kurian Vithayathil
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