The bowed-out, concave shape of the production possibilities frontier is explained by the:
A) circular flow model.
B) law of increasing costs.
C) theory of marginal cost.
D) maximization model.

Question

Quizplus · Accepted Answer

The bowed-out, concave shape of the production possibilities frontier (PPF) is explained by the law of increasing costs. This law states that as production of one good increases, the opportunity cost of producing an additional unit of this good increases, because resources are not perfectly adaptable for producing both goods. This results in a PPF that bows outward from the origin.

The Bowed-Out, Concave Shape of the Production Possibilities Frontier Is