Production Possibility Curve Shows Increasing Opportunity Costs

Steps:

• Identify the curve's shape: a bowed-outward PPC indicates trade-offs between goods.
• Calculate opportunity cost: moving along the curve, sacrificing more of one good to produce extra units of another.
• Observe the slope: the absolute slope steepens, meaning rising opportunity costs.
• Conclude the implication: resources are not perfectly substitutable, leading to inefficiency in reallocation.

Why C is correct:

• The law of increasing opportunity costs states that as production of one good increases, the opportunity cost rises due to specialized resources, reflected in the concave curve.

Why the others are wrong:

• A: Marginal returns relate to production functions, not PPC trade-offs.
• B: The curve shows increasing, not decreasing, opportunity costs.
• D: Returns to scale apply to input proportionality in production, irrelevant to PPC frontiers.

Final answer: C