Answer to Question #164312 in Microeconomics for Cameron Soto

Question

Consider two possible production possibility frontiers A and B. One is a straight line as shown in A and the other is concave toward the origin in B. Describe what happens to opportunity cost of producing desktop computers as desktop production is increased for graph A and graph B. ​[Image description: Two graphs of PPFs for laptops and desktops are shown below. Vertical axis is laptops (thousands) and horizontal axis is desktops (thousands). Graph A's PPF is a straight downward-sloping line and Graph B's PPF is concave toward the origin.]

Answer 1

Graph A

The straight line frontier (A) does not have marginal diminishing returns, opportunity costs are the same no matter how far you move along the curve; hence giving up a certain number of laptops they can still be produced; therefore, if one gives up 2,000 laptops to be produced an additional 2,000 laptops can still be produced. The opportunity cost of making more desktops means losing the opportunity of making more laptops. More desktops will be produced as you forgo production of laptops but the producer can alter combination and produce more laptops again and forgo desktops.

Graph B

The concave nature of production possibility frontier implies opportunity costs increase as you move along the curve thus making more desktops increases the opportunity cost while decreasing the opportunity cost of making laptops.