Why is the production possibility curve bowed out? Why is there an increasing opportunity cost of...

Why is the production possibility curve bowed out?
Why is there an increasing opportunity cost of a good as more of it is produced?
Explain why does an increase in supply lead to lower prices?

Solutions

Expert Solution

1) The production possibility curve bowed out, or concave, in shape due to the law of increasing opportunity cost. The law of increasing opportunity cost states that when a business continues to increase production its opportunity cost raises thus the production possibility curve is bowed out

2) The law of increasing opportunity costs states when a business increase production of one product, then opportunity cost to produce an additional product will rise. It occurs because all resources are not created equal. Few resources are better than others for producing certain products (or services).

3) There is an inverse relationship between the prices and supply of goods and services when demand is unchanged. If there is an increase in supply for goods and services while demand remains constant the prices will likely to decrease to a higher equilibrium quantity of products and services and lower equilibrium prices

Rahul Sunny answered 1 year ago

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