Question

The production possibilities curve bows outward from the origin because

A. Opportunity costs decrease as the production of goods increases
B. Opportunity costs decrease as the production of goods increases
C. More production of one good results in more production of another good
D. Resources are of uniform quality

Answer 1

The production possibilities curve bows outward because of the law of increasing opportunity cost, where the marginal opportunity cost of producing a good increases as production of it increases. This is due to the fact that resources are better suited for producing certain goods. The curve shows that allocating more resources to one good results in diminishing returns in the production of the other good.

Step-by-step explanation:

The production possibilities curve bows outward from the origin because of the law of increasing opportunity cost. As production of a good or service increases, the marginal opportunity cost of producing it increases as well. This happens because some resources are better suited for producing certain goods and services instead of others. Therefore, the production possibilities curve is bowed outwards showing that as more resources are allocated to one good, there is a diminishing return in the production of the other good.