Which of the following best describes increasing marginal opportunity costs as illustrated by a bowed-out production possibilities frontier (PPF)?

• A. Opportunity costs remain unchanged regardless of the level of production.
• B. Producing more of one good requires giving up decreasing amounts of the other good.
• C. Producing more of one good requires giving up a constant amount of the other good.
• D. Producing more of one good requires giving up increasingly larger amounts of the other good.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a Production Possibilities Frontier (PPF), which shows the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
2. Recognize that the shape of the PPF reflects opportunity costs. A straight-line PPF indicates constant opportunity costs, while a bowed-out (concave) PPF indicates increasing opportunity costs.
3. Recall that increasing marginal opportunity costs mean that as you produce more of one good, you must give up increasingly larger amounts of the other good. This happens because resources are not equally efficient in producing both goods.
4. Interpret the bowed-out shape of the PPF as a graphical representation of this principle: the slope of the PPF becomes steeper as you move along it, showing that the opportunity cost of producing additional units of one good rises.
5. Therefore, the statement 'Producing more of one good requires giving up increasingly larger amounts of the other good' best describes increasing marginal opportunity costs as illustrated by a bowed-out PPF.