A linear production possibilities frontier (PPF) indicates which of the following?

• A. No opportunity cost between the two goods
• B. Decreasing opportunity cost between the two goods
• C. Constant opportunity cost between the two goods
• D. Increasing opportunity cost between the two goods

Answer: (C)

Verified step by step guidance

1. Understand what a Production Possibilities Frontier (PPF) represents: it shows the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
2. Recognize that the shape of the PPF reflects the opportunity cost of producing one good over the other. A bowed-out (concave) PPF indicates increasing opportunity costs, while a straight (linear) PPF indicates a specific type of opportunity cost behavior.
3. Recall that a linear PPF means the opportunity cost of producing one good in terms of the other is constant because the slope of the PPF is constant at every point along the frontier.
4. Interpret the slope of the linear PPF as the rate at which one good must be sacrificed to produce more of the other good, and since this slope does not change, the opportunity cost remains the same regardless of the production level.
5. Conclude that a linear PPF indicates constant opportunity cost between the two goods, meaning the trade-off between the goods is consistent as production shifts.