What Does the Concavity (Bowed-Out Shape) of the Production Possibilities

question 6

Multiple Choice

What does the concavity (bowed-out shape) of the production possibilities curve result from?

• A) the law of demand
• B) the law of increasing opportunity cost
• C) the law of supply
• D) the law of complimentary goods

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Definitions:

Deadweight Loss

An economic inefficiency caused by a disruption in market equilibrium, leading to a loss of societal welfare.

Consumer Surplus

The disparity between the ideal total expenditure consumers are willing to make on a good or service and the real expenditure.

Producer Surplus

The distinction in financial terms between what producers expect to receive for a product or service and the actual revenue attained.

Producer Surplus

The difference between the amount producers are willing to sell a good for and the actual market price they receive, reflecting the benefit to producers from selling at a higher price.