Question

"Which statement accurately describes the concept of increasing opportunity cost?

a) It is unimportant in command economies because of central planning.
b) It suggests that the use of resources to produce a set of goods and services means that as more of one is produced, some of the other must be sacrificed.
c) It is irrelevant if the production possibilities curve is convex to the origin.
d) It suggests that unlimited wants can be fulfilled.
e) It means that resources are plentiful and opportunities to produce greater amounts of goods and services are unlimited."

Answer 1

The law of increasing opportunity cost states that as the production of a good or service increases, the marginal opportunity cost of producing it also increases.

Step-by-step explanation:

The law of increasing opportunity cost states that as the production of a good or service increases, the marginal opportunity cost of producing it also increases. This is because resources are better suited for producing certain goods and services instead of others.

For example, if a government spends more on reducing crime, the initial increase in opportunity cost may be relatively small. However, as additional resources are allocated to reducing crime, the opportunity cost increases significantly.

This concept is illustrated by the curved shape of the production possibilities curve (PPC), which shows that as more resources are added to a specific area of production, the increase in opportunity cost becomes steeper. Therefore, option b) is the correct statement that accurately describes the concept of increasing opportunity cost.