Exhibit 2-10 Production possibilities curve data Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods ____ because of ____.

Question

Exhibit 2-10  Production possibilities curve data  Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods ____ because of ____.

Quizplus · Accepted Answer

According to the data in the production possibilities table, as additional units of capital goods are produced, the opportunity cost of producing each unit of capital goods increases in terms of the production of consumption goods. This is due to the law of increasing costs, which states that as production of a good increases, the opportunity cost of producing an additional unit of that good increases because resources are not perfectly adaptable to alternative uses. Therefore, choice C, which correctly identifies the law of increasing costs as the reason for the increasing opportunity cost, is the best choice.

Exhibit 2-10 Production Possibilities Curve Data Suppose an Economy Is