+3 votes
in Economics by kratos

Why is Production Possibilities Curve concave?

1 Answer

+1 vote
by kratos
 
Best answer

The PPC is concave shaped because of increasing Marginal Rate of Transformation (MRT), that is, more and more units of one commodity are sacrificed to gain an additional unit of another commodity. MRT increase because it is assumed that no resource is equally efficient in the production of all goods. As the resource is transferred from one good to another, less and less efficient resource have to be employed. This raises the cost and the MRT.

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