When a production possibilities frontier is bowed out from the origin, production occurs under conditions of:
A) constant costs.
B) increasing costs.
C) decreasing costs.
D) indeterminate costs.
E) None of the above

Question

Quizplus · Accepted Answer

When a production possibilities frontier (PPF) is bowed out from the origin, it indicates increasing costs. This shape reflects the law of increasing opportunity costs, meaning that as production of one good increases, the opportunity cost of producing an additional unit of this good increases. This is because resources are not perfectly adaptable to the production of both goods, so more and more of less suitable resources have to be used as production shifts from one good to another.

When a Production Possibilities Frontier Is Bowed Out from the Origin