Increasing Opportunity Costs on the PPF

Steps:

• Identify the production possibilities frontier (PPF) as a curve showing trade-offs between goods.
• Note that points 1, 2, 3, and 4 lie on the bowed-out PPF, with increasing X production in each segment.
• Apply the law of increasing opportunity costs: sacrificing more of the other good per unit of X as production rises.
• Conclude opportunity costs rise in both segments due to resource specialization.

Why D is correct:

• The law of increasing opportunity costs dictates that along a concave PPF, producing more X requires reallocating less efficient resources, raising the cost in units of the other good.

Why the others are wrong:

• A: Constant costs imply a straight-line PPF, not the typical bowed shape.
• B: Decreasing costs initially contradict the standard increasing pattern.
• C: Decreasing costs in both segments ignore the law's upward trend.

Final answer: D