Question

A production possibilities frontier that is a bowed-inward line implies Select one: A. no economies of scope. B. economies of scale. C. economies of scope. D. diseconomies of scope.

Answer 1

The production possibility frontier shows all the possible combinations of two goods that can be produced with the given level of resources and the technology. The bowed out PPF shows increasing opportunity cost , the bowed in PPF shows decreasing opportunity cost and a straight line PPF shows constant opportunity cost. The bowed in PPF shows decreasing opportunity cost , as the economy produces more and more units of one good the less and less units of other good only has to forgone. This is exactly same as the economies of scope.

Ans: C).Economies of Scope.