The shape of a production possibility frontier is determined by the?
Answer Details
The shape of a production possibility frontier is determined by the concept of increasing relative costs. This means that as more of one good is produced, there is a trade-off in terms of the amount of the other good that can be produced. This is due to the fact that resources are not equally efficient at producing both goods, so as more resources are allocated to one good, the opportunity cost of producing an additional unit of that good increases. This results in a bowed-out shape of the production possibility frontier, reflecting the increasing trade-off between the two goods as more of one is produced.