The bowed shape of the Production possibilities curve illustrates _________

1. Analyze the question You are asked what the bowed-out (concave to the origin) shape of the Production Possibilities Curve (PPC) shows.

2. Explain the concept The PPC shows the maximum combinations of two goods an economy can produce with its resources and technology. Its bowed shape comes from the fact that resources are not equally suited to producing every good.

• When you shift resources from Good A to Good B, you first move the resources best suited to B.
• As production of B expands, you must use resources that are less suited to B (for example, land good for farming but poor for factories).
• So each extra unit of B costs more and more units of A given up.

This is the law of increasing opportunity cost (also called increasing marginal cost). It is what makes the curve bow outward.

3. Solution: check each option

• A. Production is inefficient: Wrong. Points on the curve are efficient. Inefficiency is shown by points inside the curve.
• B. Demand is relatively inelastic: Wrong. Elasticity of demand is about consumer responses to price changes and has nothing to do with the PPC's shape.
• C. Production is unattainable: Wrong. Unattainable points lie outside the curve, not on its shape.
• D. The law of increasing marginal cost: Correct. The bowed shape reflects rising opportunity (marginal) cost as production of one good increases.

4. Answer D. the law of increasing marginal cost

5. Exam tip Remember the PPC regions:

• On the curve = efficient
• Inside = inefficient or unemployed resources
• Outside = unattainable
• Bowed out = increasing opportunity cost
• Straight line = constant opportunity cost