Exhibit 2-8 Production possibilities frontier data

-Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _____ because of _____.

Question

Exhibit 2-8 Production possibilities frontier data
 
-Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _____ because of _____.

Quizplus · Accepted Answer

The production possibilities table in Exhibit 2-8 demonstrates the law of increasing costs. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods increases. This is because resources are not perfectly adaptable to the production of both capital and consumption goods, and as more capital goods are produced, resources that are best suited for producing consumption goods are increasingly diverted to the production of capital goods, resulting in greater inefficiency and higher opportunity costs. Therefore, choice C is the best answer.

Exhibit 2-8 Production Possibilities Frontier Data