Suppose someone is studying a production possibilities frontier (PPF)that has a bowed-out shape relative to the origin.What causes this shape?
A) economic growth
B) the law of increasing relative cost
C) absolute advantage
D) normative economics
E) more resources

Question

Quizplus · Accepted Answer

The bowed-out shape of a PPF is caused by the law of increasing relative cost. This law states that, as an economy produces more of one good, the opportunity cost of producing that good increases, due to the need to give up increasing amounts of the other good. Therefore, in order to produce more of both goods, the economy must sacrifice increasingly larger amounts of the other good, resulting in a bowed-out shape of the PPF.

Suppose Someone Is Studying a Production Possibilities Frontier (PPF)that Has