Figure 1.1 U.S. Production Possibilities Curve

-Refer to Figure 1.1. The shape of the production possibilities curve suggests that the United States produces under conditions of
A) zero opportunity cost
B) constant opportunity cost
C) increasing opportunity cost
D) decreasing opportunity cost

Question

Figure 1.1 U.S. Production Possibilities Curve
 
-Refer to Figure 1.1. The shape of the production possibilities curve suggests that the United States produces under conditions of
A) zero opportunity cost 
B) constant opportunity cost 
C) increasing opportunity cost 
D) decreasing opportunity cost

Quizplus · Accepted Answer

The shape of the production possibilities curve typically reflects increasing opportunity cost. This means as more of one good is produced, the opportunity cost of producing an additional unit (in terms of foregone production of the other good) increases. This is because resources are not equally efficient in producing all goods, so reallocating resources to produce more of one good results in increasingly larger sacrifices of the other good.