Question

The production possibilities curve bows out because

A) production is efficient.
B) of the law of increasing additional cost.
C) production is inefficient.
D) resources are not being fully utilized.

Answer 1

B). Of the law of increasing additional cost.

Step-by-step explanation:

The law of increasing costs states the proposition according to which in case of the production factors like labor, land, and capital being at maximum efficiency or output, the production cost would significantly increase more than the average cost. Since the production cost faces a hike, the opportunity cost would also increase. Therefore, the Production possibility curve bows out due to the 'law of increasing additional cost' as the increased opportunity cost due to production of goods when the factors are at maximum output would lead to making the resources inadaptable to production. Hence, the PP curve bows out.