Question

When the opportunity cost of producing a good rises as you produce more of it, you experience:_______.

a. increasing marginal utility.
b. inferior goods.
c. normative economics.
d. downward-sloping demand.
e. increasing relative costs.

Answer 1

e. increasing relative costs.

Step-by-step explanation:

The law of increasing relative costs is a principle in economics which states that, the opportunity cost of producing a good would always increase as more of the product is being produced.

Hence, when the opportunity cost of producing a good rises as you produce more of it, you experience increasing relative costs because the factors of production (capital, labor and land) are now at a maximum level of output.

Furthermore, the opportunity cost, also known as the alternative forgone, can be defined as the value, gains or benefits given up by an individual or organization in order to choose or acquire something deemed significant at the time.

Simply stated, it is the cost of not enjoying the benefits, gains or value associated with the alternative forgone or best alternative choice available.