This topic contains a solution. Click here to go to the answer

Author Question: Why does the PPF bow outward and what does that imply about the relationship between opportunity ... (Read 38 times)

james9437

  • Hero Member
  • *****
  • Posts: 568
Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity produced?
 
  What will be an ideal response?

Question 2

What does marginal cost measure?
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

mistyjohnson

  • Sr. Member
  • ****
  • Posts: 331
Answer to Question 1

Some resources are better suited to produce one type of good or service, like pizza. Other resources are better suited to produce other goods or services, like DVDs. If society allocates resources wisely, it will use each resource to produce the kind of output for which it is best suited. Consider a PPF with pizza measured on the x-axis and DVDs measured on the y-axis. A small increase in pizza output when pizza production is relatively low requires only a small increase in the use of those resources still good at making pizza and not good at making DVDs. This yields a small decrease in DVD production for a large increase in pizza production, creating a relatively low opportunity cost reflected in the gentle slope of the PPF over this range of output. However, the same small increase in pizza output when pizza production is relatively large will require society to devote to pizza production those resources that are less suited to making pizza and more suited to making DVDs. This reallocation of resources yields a relatively small increase in pizza output for a large decrease in DVD output, creating a relatively high opportunity cost reflected in the steep slope of the PPF over this range of output. The opportunity cost of pizza production increases with the quantity of pizza produced as the slope of the PPF becomes ever steeper. This effect creates the bowed out effect (the concavity of the PPF function) and means that as more of a good is produced, the opportunity cost of producing additional units increases.

Answer to Question 2

Marginal cost is the increase in total cost, which results from producing one more unit of output. Marginal costs reflect changes in variable costs.




james9437

  • Member
  • Posts: 568
Reply 2 on: Jun 29, 2018
Gracias!


bigcheese9

  • Member
  • Posts: 333
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

The longest a person has survived after a heart transplant is 24 years.

Did you know?

Critical care patients are twice as likely to receive the wrong medication. Of these errors, 20% are life-threatening, and 42% require additional life-sustaining treatments.

Did you know?

Despite claims by manufacturers, the supplement known as Ginkgo biloba was shown in a study of more than 3,000 participants to be ineffective in reducing development of dementia and Alzheimer’s disease in older people.

Did you know?

Individuals are never “cured” of addictions. Instead, they learn how to manage their disease to lead healthy, balanced lives.

Did you know?

On average, someone in the United States has a stroke about every 40 seconds. This is about 795,000 people per year.

For a complete list of videos, visit our video library