Assuming that resources are specialized, the opportunity cost of an item increases as the production of it rises.This implies that firms will produce more as
A)the price increases.
B)the price decreases.
C)the opportunity cost is greater than the price.
D)government asks firms to produce more.
E)the income of buyers increases.

Question

Quizplus · Accepted Answer

As production increases, the opportunity cost of producing each additional unit increases because resources become increasingly specialized. Therefore, firms will only produce more if the price of the item increases to cover the rising opportunity cost. This is because firms want to maximize their profits, and producing more at a lower price will decrease their profit margins.

Assuming That Resources Are Specialized, the Opportunity Cost of an Item