Author Question: What causes the production possibility curve to be bowed out? What will be an ideal ... (Read 51 times)

Hungry! · **on:** Jun 29, 2018

What causes the production possibility curve to be bowed out?

What will be an ideal response?

Question 2

Refer to the above figure. A price control has been set which has led to a surplus. This means that a

A) price ceiling has been set at P1.
B) price floor has been set at P1.
C) price ceiling has been set at P2.
D) price floor has been set at P2.

kthug · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A bowed production possibility curve indicates increasing opportunity costs. To produce more of one good, resources must be taken away from producing another good. These resources often are specialized. This implies that the resources cannot move easily from producing one good to another. The more of a good that is produced, the more it must use resources that are better suited for the other good, and the extra costs of producing another unit of the good increase.

Answer to Question 2

B