Question

Which of the following statements regarding the opportunity cost of producing potatoes and the production possibilities frontier is true for the island of Atlantis? A. The island of Atlantis has an increasing opportunity cost of producing potatoes and the production possibility frontier is bowed outward. B. The island of Atlantis has an increasing opportunity cost of producing potatoes and the production possibility frontier is bowed inward. C. The island of Atlantis has a constant opportunity cost of producing potatoes and the production possibility frontier is linear. D. The island of Atlantis has an decreasing opportunity cost of producing potatoes and the production possibility frontier is bowed outward.

Answer 1

Answer: A. The island of Atlantis has an increasing opportunity cost of producing potatoes and the production possibility frontier is bowed outward.

Explanation:

When there is an increasing opportunity cost of producing a good, the Production Possibilities Frontier (PPF) will be bowed out to represent that as more of the good is being produced, more of another good is being given up to do so.

For the island of Atlantis therefore, as they produce more of potatoes, they are giving up being able to produce whatever more and more of other goods they produce which is therefore leading to a PPF that is bowed outward.