Increasing opportunity cost implies that

Question

Quizplus · Accepted Answer

Increasing opportunity cost means that producing additional units of one good will result in increasing amounts of lost output of the other good. This occurs because resources are not perfectly adaptable to producing both goods, so as more resources are used to produce one good, they become less efficient at producing the other good. This results in a curved production possibilities frontier, rather than a straight line. Production inside the production possibilities frontier indicates that the society is not using all of its resources efficiently. Producing additional units of one good resulting in proportionately smaller reductions in the output of the other good is not indicative of increasing opportunity cost.

Increasing Opportunity Cost Implies That