The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4
-Refer to Figure 1-4.The production possibilities boundaries are drawn concave to the origin.What does this shape of the PPB demonstrate?
A)the decreasing opportunity cost of producing more of either good
B)the scarcity of resources in the economy
C)the constant opportunity cost of producing more of either good
D)the unfair distribution of resources in the economy
E)the increasing opportunity cost of producing more of either good

Question

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1-4
-Refer to Figure 1-4.The production possibilities boundaries are drawn concave to the origin.What does this shape of the PPB demonstrate?
A)the decreasing opportunity cost of producing more of either good 
B)the scarcity of resources in the economy 
C)the constant opportunity cost of producing more of either good 
D)the unfair distribution of resources in the economy 
E)the increasing opportunity cost of producing more of either good

Quizplus · Accepted Answer

The concave shape of the production possibilities boundary (PPB) demonstrates that there is increasing opportunity cost of producing more of either good. As we move along the PPB, more and more of one good must be given up to produce each additional unit of the other good, due to the fact that resources are not perfectly adaptable to the production of both goods. This is captured by the concept of increasing marginal opportunity cost.

The Diagram Below Shows Two Production Possibilities Boundaries for Country