The Production Possibilities Frontier Will Not Be Convex to the Origin

question 68

Multiple Choice

The production possibilities frontier will not be convex to the origin if:

• A)all firms experience constant returns to scale.
• B)the law of diminishing returns is universally satisfactory.
• C)at least some firms experience increasing returns to scale.
• D)no firms experience decreasing returns to scale.

---

Definitions:

Production

The process of creating goods and services through the combination of labor, materials, and technology.

Manufacturing Overhead

All indirect costs associated with the production process, excluding direct materials and direct labor costs.

Budgeted Fixed

Refers to the portion of a budget that represents fixed costs, which do not change with the level of activity within a certain range.

Manufacturing Overhead Applied

The portion of production overhead costs assigned to each unit of product based on a predetermined overhead rate, including indirect costs like utilities and rent.