Figure 2.1
-On the production possibilities curve in Figure 2.1 as agricultural production increases by 200 tons per year from 200 tons to 400 tons and then to 600 tons, the opportunity cost in terms of tons of manufacturing goods:
A) rises.
B) becomes negative.
C) falls.
D) is constant.

Question

Figure 2.1
-On the production possibilities curve in Figure 2.1 as agricultural production increases by 200 tons per year from 200 tons to 400 tons and then to 600 tons, the opportunity cost in terms of tons of manufacturing goods:
A) rises. 
B) becomes negative. 
C) falls. 
D) is constant.

Quizplus · Accepted Answer

As agricultural production increases, more resources have to be shifted from the manufacturing sector to agriculture, resulting in a higher opportunity cost of manufacturing goods. This means that to produce each additional ton of agricultural goods, more manufacturing goods have to be given up. Thus, the opportunity cost of manufacturing goods rises as agricultural production increases.

Figure 2.1 -On the Production Possibilities Curve in Figure 2.1 as Agricultural