The law of increasing opportunity cost helps to explain why PPF's are typically bowed-outward.

Question

Quizplus · Accepted Answer

The law of increasing opportunity cost states that as production of one good increases, the opportunity cost of producing the next unit of that good increases, which means that to produce more of one good, we have to give up more and more of the other good. This results in a bowed-outward shape of the PPF (Production Possibility Frontier) because of the decreasing marginal rate of transformation between the two goods. Hence, option A is correct.

The Law of Increasing Opportunity Cost Helps to Explain Why