The economy's factors of production are not equally suitable for producing different types of goods. This principle generates:
A) economic growth.
B) technical efficiency.
C) resource underutilization.
D) the law of increasing opportunity cost.

Question

Quizplus · Accepted Answer

The principle described in the question is the law of increasing opportunity cost, which states that as production of one good increases, the opportunity cost of producing additional units of that good increases, thus making it less efficient to do so. This principle is related to the concept of diminishing marginal returns, which suggests that as more resources are applied to production, each additional unit of output will yield less and less additional benefit. This principle is an important factor in determining the shape of the production possibilities frontier, which defines the limits of what can be produced given a set of resources and technology.

The Economy's Factors of Production Are Not Equally Suitable for Producing