What does a bowed-outward shape of the production possibilities curve represent?

The bowed-outward shape of the production possibilities curve (PPC) represents increasing opportunity costs as production shifts. This occurs because resources are not equally efficient in producing different goods. As more of one good is produced, the economy must reallocate resources that are increasingly less suited for the production of that good. This leads to larger sacrifices of the other good, demonstrating that the opportunity cost increases as production of a particular good rises.

For example, if an economy is producing both cars and computers, initially, the resources shifted from computer production to car production might yield relatively efficient results. However, as more computers are produced, the resources that are less suitable for car production (like labor specifically trained in computer technology) start to be used, leading to a higher opportunity cost. Thus, the curve bows outward, indicating that the rate of trade-off between the two goods becomes steeper as production shifts toward one good over the other.