A nation's production possibilities frontier is bowed outward. Suppose that the government decides to increase the production of armaments by $20 billion, and that as a result the output of consumer goods falls by $20 billion. If a further $20 billion increase beyond the initial $20 billion increase in armaments output is sought, we can expect that the output of consumer goods and services will fall further by

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The production possibilities frontier (PPF) being bowed outward indicates increasing opportunity costs. Thus, to increase production of one good (armaments), more and more of the other good (consumer goods) must be given up, leading to a decrease of more than $20 billion in consumer goods for the additional $20 billion increase in armaments.

A Nation's Production Possibilities Frontier Is Bowed Outward