Because of increasing opportunity costs, the production possibilities curve
A) is bowed out from (or concave to) the origin.
B) can be either downward- or upward-sloping.
C) at first rises, then falls eventually.
D) is a straight downward-sloping line.

Question

Quizplus · Accepted Answer

Increasing opportunity costs mean that as we produce more of one good, the opportunity cost of producing additional units of that good increases. This leads to a decreasing marginal rate of transformation (MRT), and a bowed-out production possibilities curve, which shows the tradeoff between producing two goods. Thus, option A is the best choice.

Because of Increasing Opportunity Costs, the Production Possibilities Curve