Question

True or False Ricardo's constant cost production possibilities curve is equivalent to an upward sloping supply...

True or False

Ricardo's constant cost production possibilities curve is equivalent to an upward sloping supply curve

Please explain why the answer is false

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Answer #1

Correct Answer:

False

Explanation:

The constant cost production possibility curve explains the constant cost and fixed marginal rate of substitution between the two goods an economy produces. So, it is the cost and MRTS that are used to explain the PPC. But, upward sloping supply curve explains the relationship between the price and quantity supplied. Supply curve says that supply increases with increase in prices. So, both the curves explain different aspects and behavior in the economy. PPC curve is oriented towards the macroeconomic factors, where the upward sloping supply curve is firm specific and oriented towards microeconomic factors.

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