The shape of the production possibilities curve in the above figure indicates that
A) production of corn is characterized by increasing costs while the production of cloth is characterized by decreasing costs.
B) production of both corn and cloth is characterized by increasing costs.
C) production of both corn and cloth is characterized by constant costs.
D) production of corn is characterized by constant costs and the production of cloth is characterized by increasing costs.

Question

Quizplus · Accepted Answer

The shape of the production possibilities curve typically reflects increasing costs due to the law of increasing opportunity costs. As production of one good (e.g., corn or cloth) increases, the opportunity cost of producing an additional unit of that good increases, indicating that resources are not perfectly adaptable between the production of corn and cloth. This scenario leads to a concave curve, illustrating increasing costs for producing both goods.

The Shape of the Production Possibilities Curve in the Above