Final answer:
The law of diminishing returns states that as production attempts to increase output of a second good, more resources are required, resulting in decreased additional output. This is depicted by the production possibilities frontier, representing trade-offs and efficiency in production.
Step-by-step explanation:
The economic principle being described is the law of diminishing returns. This law asserts that as more resources are directed toward producing a good or service, the additional output gained from each new unit of resource will eventually decrease. In other words, to produce more of one good, a company must use increasingly larger amounts of resources, which leads to a rise in the opportunity cost.
This concept is illustrated through the production possibilities frontier (PPF), a model that demonstrates the trade-offs in production between two goods. All points on the PPF represent productive efficiency, where it's not possible to produce more of one good without producing less of another. Countries can, however, increase their total production if they specialize in goods for which they have a comparative advantage and then trade for other goods.