The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. Refer to the above table.What is the opportunity cost of producing the third unit of capital goods?
A)4 units of consumer goods
B)5 units of consumer goods
C)6 units of consumer goods
D)7 units of consumer goods

Question

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.  Refer to the above table.What is the opportunity cost of producing the third unit of capital goods?
A)4 units of consumer goods 
B)5 units of consumer goods 
C)6 units of consumer goods 
D)7 units of consumer goods

Quizplus · Accepted Answer

To produce the third unit of capital goods, the economy must give up producing three units of consumer goods. Therefore, the opportunity cost is 3 units of consumer goods. Looking at the table, we can see that the production possibilities curve is bowed out, indicating increasing opportunity costs. This means that as more of one good is produced, the opportunity cost of producing additional units of that good increases. Thus, the best choice(s) will depend on the specific needs and preferences of the economy in question.

The Production Possibilities Curve Below Shows the Hypothetical Relationship Between