Production and cost — Economics STD 11 Commerce — Question
CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost3 Marks
Question
Why is Production Possibilities Curve concave? Explain.
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Answer
A typical PP curve is downward sloping and concave, i.e. its slope is increasing, because marginal Rate of Transformation (MRT) increases as we move downwards along the curve. MRT increases because no resource is equally efficient in production of all goods. As the resources are transferred from one good to another MRT increases because less and less efficient resources are to be transferred each time.
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