The proposition that states that as output increases for one good in an economy that is on its production possibilities curve, the cost of additional units of the good on the horizontal axis will be greater and greater is the:
A) law of absolute advantage.
B) law of increasing opportunity cost.
C) law of policy ineffectiveness.
D) law of demand.

Question

Quizplus · Accepted Answer

The law of increasing opportunity cost states that as output increases for one good, the cost of additional units of the good on the horizontal axis will increase, due to the fact that resources are not perfectly adaptable to producing both goods. This is reflected in the bowed-out shape of the production possibilities curve. The other options are not relevant to this concept.

The Proposition That States That as Output Increases for One