Analyzing PPC Shapes for Opportunity Costs

Steps:

• Identify the shape of each country's PPC: bowed-out for increasing opportunity cost, straight for constant, bowed-in for decreasing.
• For country X, a bowed-out curve shows increasing opportunity cost as more consumer goods are produced.
• For country Y, a straight-line curve indicates a constant slope, meaning constant opportunity cost.
• Compare to choices: only Y's constant cost matches option C.

Why C is correct:

• Constant opportunity cost occurs when the PPC is a straight line, as the rate of trade-off between goods remains fixed per the definition of opportunity cost in PPC theory.

Why the others are wrong:

• A: Decreasing opportunity cost requires a bowed-in PPC, but the diagram shows X with increasing (bowed-out) and Y with constant, not decreasing for both.
• B: PPCs show production possibilities, not prescriptive optimal points like 40 capital and 20 consumer goods.
• D: PPCs indicate maximum potential output, not actual production levels or comparisons between countries.

Final answer: C