The principle of increasing opportunity cost leads to
A) a production possibilities frontier PPF) that is bowed outward from the origin.
B) an outward shift of the production possibilities frontier PPF).
C) an inward shift of the production possibilities frontier PPF).
D) a production possibilities frontier PPF) that is bowed inward from the origin.

Question

Quizplus · Accepted Answer

The principle of increasing opportunity cost states that as more of one good is produced, the opportunity cost (in terms of foregone production of the other good) increases. This leads to a bowed out production possibilities frontier (PPF) because as more of a good is produced, the opportunity cost of producing additional units of that good becomes higher and higher. Therefore, the PPF is not linear but bowed outward from the origin.

The Principle of Increasing Opportunity Cost Leads to