1.6 Panel A shows a PPF for two goods Xand Y. Which of the following is the reas

Question

1.6 Panel A shows a PPF for two goods Xand Y. Which of the following is the reason why the PPF is convex? (a) The country is facing scarcity (b) The country is in a recession (c) The marginal productivity of labor is not diminishing in either industry (d) The marginal productivity of labor is diminishing in at least one industry (e) None of the above 1.7 Panel B shows another PPF. Which of the following is the reason true for sure? (a) The country is facing scarcity (b) The country is in a recession (c) Both industries have the constant marginal product labor (not diminishing) (d) None of the above Panel A Panel B

Explanation / Answer

The production possibility curve shows the possible combinations of two goods that can be produced with the available resources in the country. And the slope of the production possibility curve indicates the opportunity cots, if the PPF is linear there is constant opportunity cost and if the PPF is convex the opportunity cost will be increasing.

Any point on the production possibility shows the marginal opportunity costs.

1.6- Ans: d) The marginal productivity of the labour is diminshing in at least one industry.

1.7- Ans: c) Both industries have the constant marginal product of labour.

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