- CFA Exams
- CFA Exam: Level I 2021
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 6. Marginal Revenue, Marginal Cost, and Profit Maximization

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**CFA Practice Question**

To graphically demonstrate the principle of increasing marginal opportunity cost, the production possibility curve must be ______.

B. bowed out

C. bowed in

A. straight

B. bowed out

C. bowed in

Correct Answer: B

When the production possibility curve is bowed out, as you increase production of one good, the slope of the curve becomes steeper. This implies that more and more of the other good must be given up. This follows the principle of increasing marginal opportunity cost.

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**User Contributed Comments**
9

User |
Comment |
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vmt2002 |
Didn't know what bowed in/out meant, maybe could have used convex/concave? |

azramirza |
Does bowed in means MC curve? |

boddunah |
bowed in /bowed out did not help . |

boddunah |
getting answer right with bow in / bow out has a binomial probability of 0.5.. added quants for fun. |

bundy |
Bowed out means away from the horizontal axis...which is the Marginal cost curve...which follows the principle of increasing marginal opp cost |

Bududeen |
bowed out means the curve is shaped away from the origin i.e.concave and and bowed in means shaped towards the origin ie convex. not to the horizontal nor the vertical axis. |

schweitzdm |
Use google images for "bowed out concave" and "concave vs convex" for graphic examples. |

fangluez |
Hate the wording of this question. Can we just stick to concave/convex? |

Huricane74 |
Production Possibilities Curve https://www.youtube.com/watch?v=83m0_pCky50 |