Question

Suppose there is a two good economy that produces medical devices and computers. Suppose the economy goes from 80 percent of its economy devoted to the production medical devices to 100 percent, and there is relatively large opportunity costs in terms of computer production. What is the most likely cause of the relatively large opportunity costs in terms of computer production

Answer 1

A. Resources are being converted that have a comparative advantage in computer production

Explanation:

As additional resources are diverted, the marginal grow in output will convert into smaller and smaller due to the law of diminishing returns in the production possibility frontier.

In the meantime, computer production would cost high and potential, as more and more resources are being diverted to the production of medical devices. In order for the economy to go 100% in the manufacture of medical devices, it would have to shift resources that are better at making computers and would thus face high opportunity costs because such resources with a competitive advantage in computer production could have produced far more computers than medical devices.