The table below shows annual production possibilities (’000 million per year) for a country that can produce only apple or orange with the resources available. Which of the following statements about this country’s PPF is INCORRECT?

Question

BlackTom AI · Accepted Answer

Compute the opportunity cost between successive points on the PPF to test whether the trade-off is constant. Relevant concepts: PPF shows maximum feasible combinations (technical efficiency), opportunity cost equals what must be given up to gain one more unit of the other good, and a constant opportunity cost produces a straight-line PPF while increasing opportunity cost produces a bowed-out (concave) PPF.

Step-by-step calculations:
- Move from Point A (0 apples, 12 oranges) to B (6 apples, 10 oranges): apples increase by 6, oranges fall by 2. Opportunity cost of 6 more apples = 2 oranges, so cost per apple = 2/6 = 1/3 orange.
- Move from B (6,10) to C (12,6): apples increase by 6, oranges fall by 4. Opportunity cost of 6 apples = 4 oranges, cost per apple = 4/6 = 2/3 orange.
- Move from C (12,6) to D (18,0): apples increase by 6, oranges fall by 6. Opportunity cost of 6 apples = 6 oranges, cost per apple = 6/6 = 1 orange.

Because the opportunity cost per additional apple rises from 1/3 to 2/3 to 1 orange as we move along the frontier, the trade-off is not constant. That implies a non-linear (concave/bowed-out) PPF reflecting increasing opportunity costs. Therefore statement (a) claiming the PPF is linear with a constant trade-off is incorrect.

Why the other options are not incorrect:
- (b) Allocative efficiency depends on preferences and social choices, so without more information we cannot say which point is allocatively efficient — correct statement.
- (c) The PPF indeed illustrates scarcity and trade-offs — correct.
- (d) Points on the PPF (A–D) represent maximum feasible production combinations, so they are technically efficient — correct.

Conclusion: option a is the incorrect statement, matching the provided answer.

The table below shows annual production possibilities (’000 million per year) for a country that can produce only apple or orange with the resources available. Which of the following statements about this country’s PPF is INCORRECT?Single choice

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