Question

3 the economy is saving money. there are no associated opportunity costs. Question 2 A production possibilities frontier has a downward slope because (1) increased production of one good is associated with lower profit from the other good. (2) increased production of one good reduces production of the other good. (3) increased production of one good is associated with lower profit from that good. 4 increased production of one good increases production of the other good. Question 3

Answer 1

Let's first of all know about Production Possibility Frontier :-

Production Possibility Frontier (PPF) :-

It is a locus of points of different combinations of the two goods any country or economy can produce with a given set of resources and at a certain time. One axis represents amount of good 1 produced while the other axis represents the amount of good 2 produced. All the points lying on or within PPF represents feasible amount of production in the Economy.

It's shape is downward sloping with usually bulging outward but always downward sloping.

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Goos al 15 - t 8 16 20 GOOD 1 PRODUCTION POSSIBILITY FRONTIER
As we can see from the above figure the graph of PPF.

So now let's look at each of the option

Option 1 :- Increased Production of one good is associated with lower profit from the other good

Since production possibility frontier says nothing about profit this option is Wrong.

Option 2 :- Increased production of one good reduces production of other good

As we can see from the above figure that the downward sloping PPF has the property that as the production of any one good rises the production of other falls. Here in the graph we can see as the production of Good 1 increases from 8 to 16, the production of Good 2 falls from 25 to15. Hence we can say Option 2 is Correct.

​​​​​​Option 3 :-  Increased Production of one good is associated with lower profit from that good.

Again as we know PPF is not depicting anything about profit so this option is also Wrong.

Option 4 :- Increased production of one good increases the production of other good.

As we can see from the above figure that the downward slope represents the trade-off that is for getting something of one good you have to give off or sacrifice a part of the other good. This increase of both goods is only possible when PPF is upward sloping which is impossible. So this option is also Wrong.

So Option 2 which states Increased production of one good reduces the production of the other good​​​is the Correct Option.