For an entire economy, the production possibilities frontier (PPF) is typically:

• A. convex to the origin, reflecting decreasing opportunity costs
• B. a straight line, indicating constant opportunity costs
• C. concave to the origin, reflecting increasing opportunity costs
• D. vertical, showing that only one good can be produced

Answer: (C)

Verified step by step guidance

1. Understand the concept of the Production Possibilities Frontier (PPF): it represents the maximum combinations of two goods that an economy can produce given its resources and technology.
2. Recall that the shape of the PPF depends on opportunity costs: if opportunity costs increase as you produce more of one good, the PPF will be concave (bowed out) to the origin.
3. Recognize that increasing opportunity costs occur because resources are not equally efficient in producing all goods, so shifting resources to produce more of one good results in larger sacrifices of the other good.
4. Contrast this with constant opportunity costs, which produce a straight-line PPF, and decreasing opportunity costs, which would produce a convex PPF (though this is less common in real economies).
5. Conclude that for an entire economy, the PPF is typically concave to the origin, reflecting increasing opportunity costs as resources are reallocated between goods.