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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

What condition must hold for the PPF to be bowed outward (concave downward)? To be a straight line?

To determine

Explain what condition must hold PPF to be bowed outward and straight line.

Explanation

PPF refers to the different combination of goods and services that can be produced efficiently with given resources by a country. Any points inside the PPF represent inefficient usage of the resources, and any points outside the PPF represent that it is not attainable with the available resources. A bowed-out PPF represent increasing the opportunity cost of two goods.

The condition that must hold for the PPF to be bowed outward is, the resources must be specialized, thus the law of increasing opportunity cost holds...

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