Answer to Question #75068 in Microeconomics for Susmeeta

Question

Why is production possibilities curve is concave explain

Answer 1

According to MANNING (2014), inadaptability of resources results to the concave shape of the production possibility curve. It can be supported by the law of increasing opportunity cost which states that: ‘as the production of one good rises, the opportunity cost of producing that good increases.’ For example; in any society folks must deal with limited resources through comparison of their opportunity costs. If a country opts for production of more weapons, then the country should surrender some of the other goods, talk of food. The reason is resources such as capital or labor should be relocated to produce weapons (MANNING, 2014).