Why is Production Possibilities Curve concave? Explain.

Question

✓

Answer

PPC is concave because of increasing marginal opportunity cost (MOC).
This behavior of the MOC is based on the assumption that all resources are not equally efficient in production of all goods.
Rise in opportunity cost occurs when factors (resources) which are specialized or more adopted for production of a piece of particular good (say, tanks), is transferred to the production of another good (say, wheat) for which they are less productive or less specialized.
Thus, transfer of resources from more productive to less productive uses indirectly means fall in their productivity, with the result more of such resources are needed to produce an additional unit of the other commodity. Thus marginal opportunity cost goes on increasing making the PP curve concave in shape.

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

S. No.		(₹in crores)
(i)	Gross value added at market price by the primary sector.	300
(ii)	Private final consumption expenditure.	750
(iii)	Consumption of fixed capital.	150
(iv)	Net indirect taxes.	120
(v)	Gross value added at market price by secondary sector.	200
(vi)	Net domestic fixed capital formation.	220
(vii)	Change in stocks.	(-)20
(viii)	Gross value added at market price by the tertiary sector.	700
(ix)	Net imports Government final consumption expenditure.	50
(x)	Government final cosumption expenditure.	150
(xi)	Net factor income from abroad.	20