Question

The production possibilities frontier has a bowed-out shape because the opportunity cost of butter rises as more butter is produced. Indicate which of the points are impossible for the economy to achieve and which are feasible but inefficient.

Answer 1

A production possibilities frontier has a bowed-out shape due to the law of increasing opportunity cost. Points outside the PPF are unattainable, and points inside the PPF are feasible but inefficient.

Step-by-step explanation:

A production possibilities frontier (PPF) has a bowed-out shape because of the law of increasing opportunity cost. The law of increasing opportunity cost states that as an economy produces more of one good, the opportunity cost of producing that good increases. This is because resources are not equally suited to produce both goods, and as more resources are allocated to one good, the resources that are best suited for the other good are being used less efficiently. Therefore, points outside the PPF are unattainable, and points inside the PPF are feasible but inefficient.