When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good
a. increases as more of the good is produced.
b. decreases as more of the good is produced.
c. does not change as more of the good is produced.
d. may increase, decrease, or not change as more of the good is produced.
The correct answer and explanation is :
Correct Answer: a. increases as more of the good is produced.
Explanation:
A Production Possibilities Frontier (PPF) is a curve that shows the maximum possible output combinations of two goods that an economy can produce, given its available resources and technology. When the PPF is bowed outward, it indicates that the opportunity cost of producing additional units of a good increases as more of that good is produced.
This increasing opportunity cost occurs because resources are not equally efficient in producing all goods. As production shifts from one good to another, the economy must reallocate resources that may not be well-suited for producing the new good. Initially, the most efficient resources are used, resulting in a lower opportunity cost. However, as more production is shifted, less efficient resources must be used, causing the opportunity cost to rise.
For example, consider an economy that produces cars and computers. Suppose at first, the economy reallocates workers and machinery that are well-suited for producing computers to increase car production. The opportunity cost (in terms of computers given up) is low. However, as car production continues to expand, the economy must start diverting resources that are highly specialized in making computers, which leads to a larger sacrifice in computer production. Thus, the opportunity cost increases.
This principle reflects the law of increasing opportunity cost, which states that as more of a good is produced, the opportunity cost of producing an additional unit rises. This explains why the PPF is concave (bowed outward) rather than a straight line. If resources were perfectly adaptable for both goods, the PPF would be linear, and the opportunity cost would remain constant.
In conclusion, when the PPF is bowed outward, the opportunity cost of producing additional units of a good increases, making option (a) the correct answer.