A society can produce two goods: donuts and beer. The society's production possibility frontier is negatively sloped and "bowed outward" from the origin. As this society moves down its production possibility frontier, producing more and more units of donuts, the opportunity cost of producing beer

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The "bowed outward" shape of the production possibility frontier indicates increasing opportunity cost, meaning that as more and more units of donuts are produced, the society must give up increasingly larger amounts of beer production. Therefore, the opportunity cost of producing beer increases as the society moves down its production possibility frontier.

A Society Can Produce Two Goods: Donuts and Beer