Figure 3-2

In Figure 3-2, the production possibilities frontier has a bowed-out shape because of the law of
A) decreasing costs.
B) increasing costs.
C) demand.
D) comparative advantage.

Question

Figure 3-2

In Figure 3-2, the production possibilities frontier has a bowed-out shape because of the law of
A) decreasing costs. 
B) increasing costs. 
C) demand. 
D) comparative advantage.

Quizplus · Accepted Answer

The bowed-out shape of the production possibilities frontier indicates increasing costs. As more of one good is produced, increasing amounts of the other good must be given up, which means that the opportunity cost of producing one good increases as more of it is produced. This is because the resources needed to produce the good have varying degrees of productivity and efficiency.

Figure 3-2 In Figure 3-2, the Production Possibilities Frontier Has a Bowed-Out