Exhibit 2-15 Production possibilities curve

In Exhibit 2-15, evidence of the law of increasing opportunity costs is:

Question

Exhibit 2-15 Production possibilities curve

In Exhibit 2-15, evidence of the law of increasing opportunity costs is:

Quizplus · Accepted Answer

The law of increasing opportunity costs states that as an economy produces more of a good, the opportunity cost of producing that good increases. In this exhibit, to get the first 10 capital goods, the economy has to give up 2 consumption goods, which means the opportunity cost is 2/10 or 0.2. However, to get the next 10 capital goods, the economy has to give up 8 consumption goods, which means the opportunity cost is 8/10 or 0.8. This demonstrates increasing opportunity costs. The downward slope of the production possibilities curve also indicates increasing opportunity costs, but it is not specifically mentioned in the question. The amount of capital goods increasing as the economy moves from point J to point N does not necessarily indicate increasing opportunity costs, as it could be due to other factors such as an increase in resources or technology. The amount of capital goods increasing as the economy moves from point L to point G does not relate to the law of increasing opportunity costs.

Exhibit 2-15 Production Possibilities Curve