Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. For these data, the law of increasing opportunity costs is reflected in the fact that
A) the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point.
B) larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.
C) the production possibilities data would graph as a straight downsloping line.
D) the economy's resources are presumed to be scarce.

Question

Answer the question on the basis of the data given in the following production possibilities table.  Refer to the table. For these data, the law of increasing opportunity costs is reflected in the fact that
A) the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point. 
B) larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods. 
C) the production possibilities data would graph as a straight downsloping line. 
D) the economy's resources are presumed to be scarce.

Quizplus · Accepted Answer

The law of increasing opportunity costs states that as the production of one good increases, the opportunity cost of producing additional units of that good increases, resulting in a bowed out (concave) shape of the production possibilities curve. In this table, as more capital goods are produced, the opportunity cost in terms of consumer goods increases, reflected in the decreasing marginal rate of transformation between the two goods. Therefore, larger and larger amounts of consumer goods must be sacrificed to get additional units of capital goods, leading to the bowed out shape of the production possibilities curve and reflecting the law of increasing opportunity costs.

Answer the Question on the Basis of the Data Given