Refer to the above figure. The shape of the production possibility curve indicates that production of
A) wheat is characterized by increasing costs while the production of beans is characterized by decreasing costs.
B) wheat is characterized by decreasing costs while the production of beans is characterized by increasing costs.
C) both goods are characterized by increasing costs.
D) both goods are characterized by decreasing costs.

Question

Quizplus · Accepted Answer

The shape of the production possibility curve typically reflects increasing opportunity costs, meaning as more of one good is produced, the opportunity cost of producing an additional unit of that good increases. This is due to resources not being equally efficient in the production of all goods. Therefore, if the production possibility curve indicates that as production shifts from one good to another, the cost of producing additional units increases, it suggests that both goods are characterized by increasing costs.

Refer to the Above Figure