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 one good, the opportunity cost of producing that good increases. Exhibit 2-15 shows that to get the first 10 capital goods (moving from point J to point K), the economy has to give up 2 consumption goods. However, to get the next 10 capital goods (moving from point K to point L), the economy has to give up 8 consumption goods, indicating that the opportunity cost of producing capital goods is increasing. Therefore, choice A is the correct answer. Option B is incorrect because the downward slope of the production possibilities curve simply shows the relationship between the production of two goods. Option C is incorrect because the increase in the amount of capital goods does not necessarily indicate the law of increasing opportunity costs. Option D is also incorrect as there is a decrease in the production of consumption goods when moving from point L to point G, indicating a trade-off between consuming goods and producing capital goods.

Exhibit 2-15 Production Possibilities Curve