The production possibilities curve for two products is bowed out because
A) as the production of a good increases, opportunity cost increases.
B) as the production of a good increases, opportunity cost is unchanged.
C) the qualities of the resources are not identical.
D) there are unemployed resources.

Question

Quizplus · Accepted Answer

The bowed-out shape of the production possibilities curve indicates increasing opportunity cost. As the production of one good increases along the curve, more and more resources specialized in producing that good need to be redirected from the production of the other good, resulting in increasing opportunity cost. This is why the curve is bowed outwards or concave.

The Production Possibilities Curve for Two Products Is Bowed Out