A production possibilities curve. Which of the following best explains why this PPC is bowed outward from the origin? The resources used to produce scooters and ice cream are not interchangeable. This increases the opportunity cost of making that good, resulting in a bowed out PPC.

A PPF curve is downward sloping, that is, it shows a negative relationship between the goods. This implies as the production of one good increases, the quantity produced of the other good decreases. Also, a PPF is bows outward, which implies that there is an increasing opportunity cost of production.

A straight line production possibilities curve has constant opportunity cost (constant cost technology). Points outside the production possibilities frontier illustrate production points that cannot be attained. Generally, opportunity costs increase and the production possibilities frontier bows outward.

The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. Points on the interior of the PPC are inefficient, points on the PPC are efficient, and points beyond the PPC are unattainable.

The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology. Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.

The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions.

The two main characteristics of PPC are:

• Slopes downwards to the right: PPC slopes downwards from left to right.
• Concave to the point of origin: It is because to produce each additional unit of commodity A, more and more units of commodity B will have to be sacrificed.

A player attends baseball training to be a better player instead of taking a vacation. The opportunity cost was the vacation. Jill decides to take the bus to work instead of driving. It takes her 60 minutes to get there on the bus and driving would have been 40, so her opportunity cost is 20 minutes.

Three Key Factors of Opportunity Cost

• Money. With financial considerations to weigh, the key question to ask before making an opportunity cost decision is what else would you do with the money you’re about to spend on a single decision?
• Time.
• Effort/Sweat equity.

Assuming your other options were less expensive, the value of what it would have cost to rent elsewhere is your opportunity cost. Sometimes the opportunity cost is high, such as if you gave up the chance to locate in a terrific corner store that was renting for just $2,000/month.

Understanding Comparative Advantage Put simply, an opportunity cost is a potential benefit that someone loses out on when selecting a particular option over another. The company with the lower opportunity cost, and thus the smallest potential benefit which was lost, holds this type of advantage.

First, remember that opportunity cost is the value of the next-best alternative when a decision is made; it’s what is given up. In reality, however, opportunity cost doesn’t remain constant. As the law says, as you increase the production of one good, the opportunity cost to produce the additional good increases.