Which of the following statements is true?

Question

Quizplus · Accepted Answer

The production possibilities curve of an economy is concave because of the law of diminishing returns. As we produce more and more of one good, we will have to give up increasing amounts of the other good. This means that the opportunity cost of producing a good increases as we produce more of it. As a result, the production possibilities curve is concave. A is false because the production possibilities curve can shift due to changes in technology, resources or institutions. B is false because the production possibilities curve can also shift to the left if there is a decrease in resources, for example. D is false because the slope of the production possibilities curve represents the opportunity cost of producing one good in terms of the other, not the marginal cost.

Which of the Following Statements Is True