The production possibilities curve bows out because
A) production is efficient.
B) of the law of increasing additional cost.
C) production is inefficient.
D) resources are not being fully utilized.

Question

Quizplus · Accepted Answer

The production possibilities curve bows out, also known as concave to the origin, because of the law of increasing additional cost. As we produce more of one good, we have to give up increasing amounts of the other good, and the opportunity cost of producing an additional unit of a good increases. This means that the more we produce of a good, the more resources we have to divert from the production of the other good, and the more expensive it becomes to produce additional units. Therefore, the curve is bowed outwards to show that the opportunity cost is increasing.

The Production Possibilities Curve Bows Out Because