When there are diminishing marginal returns to factors of production, the PPF is:
A) a negatively sloped straight line.
B) bowed out from the origin.
C) caved in toward the origin.
D) a positively sloped straight line.

Question

Quizplus · Accepted Answer

When there are diminishing marginal returns to factors of production, the PPF is bowed out from the origin. This implies that as we increase the production of one good, we have to sacrifice increasing amounts of the other good. This is because resources are not equally efficient in producing both goods, and as we use more and more of a factor of production, the additional output produced decreases. This is consistent with the law of diminishing marginal returns.

When There Are Diminishing Marginal Returns to Factors of Production