The production possibilities curve for capital and consumer goods is concave to the origin because _____
A) of decreasing opportunity costs of production.
B) resources are not perfectly adaptable to the production of both goods.
C) consumer goods and capital goods equally contribute to economic growth.
D) the level of technology along the frontier is assumed to vary.
E) of constant returns to scale.

Question

Quizplus · Accepted Answer

The concavity of the production possibilities curve for capital and consumer goods indicates that resources are not perfectly adaptable to the production of both goods. This is due to the concept of diminishing marginal returns, where the more resources are allocated to one good, the less efficiently they can be used to produce the other good. As a result, the opportunity cost of producing one good in terms of lost production of the other increases.

The Production Possibilities Curve for Capital and Consumer Goods Is