Answer to Question #103111 in Economics for ravinder singh

Question

When looking at a production possibilities​ boundary, any point that is outside the boundary demonstrates
▼
opportunity cost
efficiency
scarcity
choice
. The
▼
negative
positive
slope of the production possibilities boundary demonstrates
▼
.

Answer 1

A)Scarcity

B). Opportunity Cost

Production possibilities curve refers to a curve which measures maximum output of two goods by using an amount of input which is fixed. The input is usually any combination of four factors of production which are entrepreneurship, capital goods, labor, and natural resources. The curve demonstrates the concept of opportunity cost and choice.

When the economy is producing at a point which is inside the curve, it will not be producing efficiently as it should, since it can increase production of investment and consumer goods with resources that it has already. But outside, the production possibilities boundaries, it would not be possible to produce, thus it demonstrates scarcity.

On the other hand, of the economy wants to increase its consumer goods production, it will have to sacrifice investment goods production. Thus, it can be said that the opportunity cost of producing investment goods is consumer goods. The curve will then be negative.

Hence, when looking at a production possibilities​ boundary, any point that is outside the boundary demonstrates scarcity. The negative slope of the production possibilities boundary demonstrates opportunity cost.