The concavity (bowed-out shape) of the production possibilities curve is the result of:

Question

Quizplus · Accepted Answer

The concavity of the production possibilities curve is the result of the law of increasing opportunity cost. As we move from producing one good to producing more of it, we have to give up increasing amounts of the other good. This is because resources are not equally productive in all activities, and the least costly resources are used up first. As we move down the production possibilities curve, we are producing more and more of the good that is less efficient and requires more and more of those less efficient resources. This leads to an increasing opportunity cost of producing additional units of that good, resulting in a bowed-out shape of the curve. Hence, C is the correct answer.

The Concavity (Bowed-Out Shape) of the Production Possibilities Curve Is