Why is production possibilities frontier bowed outward

In Figure 1, producing at points A or B is attainable, but producing at point C is unattainable. The opportunity cost of an action is the highest-valued alternative forgone. The PPF makes this idea precise and enables us to calculate the opportunity cost. Along the PPF , there are only two goods, so only one alternative is forgone. To produce more lattes, we must produce fewer sandwiches.

The opportunity cost of producing an additional latte is the number of sandwiches we must forgo. And the opportunity cost of producing an additional sandwich is the number of lattes we must forgo.

The PPF is bowed outward because resources are not all equally productive in all activities. People with many years of experience working for Starbucks are good at producing lattes but not very good at producing sandwiches. So if we move some of these people from Starbucks to Subway, we get a small increase in the quantity of sandwiches but a large decrease in the quantity of lattes. Similarly, people who have spent years working at Subway are good at producing sandwiches, but they have no idea how to produce a latte.

So if we move some people from Subway to Starbucks, we get a small increase in the quantity of lattes but a large decrease in the quantity of sandwiches. The more we produce of either good, the less productive are the additional resources we use and the larger is the opportunity cost of one unit of that good.

A linear PPF would arise if resources were equally productive in all activities. In our example, if all workers were equally good at producing lattes and sandwiches, then the PPF would be a line. In cases with extreme specialization of labor or mass production, moving along the PPF would bring decreasing opportunity cost, and the PPF would be bowed inward.

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Press ESC to cancel. Social studies. Ben Davis August 27, What does a bowed outward PPF represent? When production possibilities frontier is bowed outward the opportunity cost of producing an additional unit of a good? What is the shape of a PPC? When a production possibilities frontier is bowed outward quizlet?

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