Assume a bowed-out production possibilities frontier showing possible output levels of good A and good B.What will the opportunity cost of producing the first 10 units of A usually be?

Question

Quizplus · Accepted Answer

In a bowed-out production possibilities frontier, the opportunity cost increases as more of a good is produced. Therefore, the opportunity cost of producing the first 10 units of A would be less than the opportunity cost of producing the second 10 units of A. This is because as more of good A is produced, resources that are best suited to produce B are redirected to produce A, causing the production of B to decrease, which makes the opportunity cost of producing A higher. Therefore, the best choice is B because it correctly identifies that the opportunity cost of producing the first 10 units of A is less than the opportunity cost of producing the second 10 units of A.

Assume a Bowed-Out Production Possibilities Frontier Showing Possible Output Levels