A production possibilities curve is negatively sloped because:
A)the price of a good falls as you move down along the curve.
B)resources are wasted as you move along the curve.
C)it is not possible to adjust production decisions at all once an economy operates on the curve.
D)once on the frontier, it is only possible to increase production of one good by reducing production of the other.
E)of the law of diminishing returns to scale.

Question

Quizplus · Accepted Answer

The production possibilities curve represents the maximum output an economy can produce with its available resources and technology. If an economy wants to produce more of one good, it has to reduce the production of the other good. This is known as the concept of opportunity cost. Therefore, the production possibilities curve is negatively sloped as it shows the trade-offs an economy has to make between producing two goods. The slope illustrates the decreasing marginal rate of transformation, as more and more resources are transferred from one good to another, the opportunity cost increases.

A Production Possibilities Curve Is Negatively Sloped Because