Question

Why does the PPC have a bowed-out shape?

A) To accommodate more data points
B) To indicate a negative correlation
C) To show equal distribution of data
D) To emphasize a positive correlation

Answer 1

The PPC has a bowed-out shape because of the law of increasing opportunity cost.

Step-by-step explanation:

The PPC (Production Possibilities Curve) has a bowed-out shape because of the law of increasing opportunity cost. This law states that as more of a particular good is produced, the opportunity cost of producing an additional unit of that good increases. This is due to the fact that resources are usually not equally suited to producing both goods represented on the PPC. As an economy moves from producing more of one good to more of another, it must allocate resources that are less well-suited to producing the second good, resulting in a higher opportunity cost and a bowed-out shape on the PPC.