The principle of comparative advantage states that specialization increases productivity,but the principle of increasing opportunity costs states that when you increase production of a single good you must use increasingly costly resources.These two principles
A) are evidence that economic theory is internally inconsistent.
B) are an example of the difference between abstract models and the real world.
C) cannot be true at the same time.
D) together account for the outward bow shape of production possibility curves.
E) explain the circular flow of incomE.

Question

Quizplus · Accepted Answer

The principle of comparative advantage and the principle of increasing opportunity costs both play a role in determining the outward bow shape of production possibility curves. As specialization occurs and more resources are devoted to a single good, the opportunity cost of producing that good increases, causing the curve to bow outwards. Therefore, these principles can both be true at the same time and work together to explain the shape of production possibility curves.

The Principle of Comparative Advantage States That Specialization Increases Productivity,but