Below is a production possibilities curve involving tea and videos.

-Refer to the graph above to answer this question.Which of the following illustrates the law of increasing costs?
A)Any point outside the production possibilities curve.
B)A "bowed-out" production possibilities curve.
C)A straight-line production possibilities curve.
D)Any point inside the production possibilities curve.

Question

Below is a production possibilities curve involving tea and videos.
 
-Refer to the graph above to answer this question.Which of the following illustrates the law of increasing costs?
A)Any point outside the production possibilities curve. 
B)A "bowed-out" production possibilities curve. 
C)A straight-line production possibilities curve. 
D)Any point inside the production possibilities curve.

Quizplus · Accepted Answer

A "bowed-out" production possibilities curve, such as the one shown in the graph, illustrates the law of increasing costs. This law states that as production of one good increases, the opportunity cost of producing the other good increases as well. This is because resources are not equally efficient in producing both goods, and as more resources are shifted from producing one good to the other, the additional units of the second good produced become increasingly costly to produce.

Below Is a Production Possibilities Curve Involving Tea and Videos