Why do increasing opportunity costs of production occur?
A)Factors of production are homogeneous
B)Factors of production are being used in the same fixed proportion
C)Factors of production are completely adaptable to every use
D)All factors of production are not equally suited in the production of all commodities

Question

Quizplus · Accepted Answer

Increasing opportunity costs of production occur when all factors of production are not equally suited in the production of all commodities. As a producer uses more of a particular factor of production, he must sacrifice larger and larger amounts of alternative goods that could have been produced with the same amount of that factor. This is because the marginal product of that factor declines as it becomes increasingly specialized for the production of a single good, resulting in a higher opportunity cost of producing additional units of that good.

Why Do Increasing Opportunity Costs of Production Occur