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Figure 1-2 A Production Possibilities Boundary Unattainable combinations Ay Production b possibilities boundary Ax Quantity of Investment Goods o d Attainable combinations C 0 Quantity of Consumption Goodse' PHIL 21 T PHIL 21 Course LESSON In Course Course S Chapter S Final Re My She Mic x Assign G oportu ChatGF |G triangle + X C platform.virdocs.com/read/2124215/29/#/4/2[P70010177150000000000000000005(7]/14[P70010177150000000000000000005D8]/2./1:0,/.. @ G TP *0 Update e' eConcordia - Edit A... C MyConcordia - Con.. = BRedShelf. eReader E Q TT : Figure 1-2 Full Alternative Text The shape of the production possibilities boundary in Figure 1-20 implies that an increasing amount of consumption goods must be given up to achieve equal successive increases in the production of investment goods. This shape, referred to as concave to the origin, indicates that the opportunity cost of either good increases as we increase the amount of it that is produced. A straight-line boundary would indicate that the opportunity cost of one good stays constant, no matter how much of it is produced. The concave shape in Figure 1-2 is the way economists usually draw a country's production possibilities boundary. The shape occurs because each factor of production is not equally useful in producing all goods. To see why differences among factors of production are so important, suppose we begin at point c in Figure 1-20, where most resources are devoted to the production of consumption goods, and then consider gradually shifting more and more resources toward the production of investment goods. We might begin by shifting the use of iron ore and other raw materials. These resources may not be very well suited to producing consumption goods (like food) but may be essential for producing tools, machinery, and factories. This shift of resources will therefore lead to only a small reduction in the output of consumption goods but a substantial increase in the output of investment goods. Thus, the opportunity cost of producing more units of investment goods, which is equal to the forgone consumption goods, is small. But as we shift more and more resources toward the production of investment goods, and therefore move along the production possibilities boundary toward point a, we must shift more and more resources that are actually quite well suited to the production of consumption goods, like arable agricultural land. As we produce more and more investment goods (by devoting more and more resources to producing them), the amount of consumption goods that must be forgone to produce one extra unit of investment goods rises. That is, the opportunity cost of producing investment goods rises as more of them are produced. 7 Go Type here to search M W P 100%] Earn.. A 9 ENG 11:33 PM 9/13/2023