Question

Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles,A. the more likely it is to satisfy all consumer wants.B. the opportunity cost of consumer wants being satisfied will diminish.C. every additional missile will reduce consumer goods production more and more.

Answer 1

C. every additional missile will reduce consumer goods production more and more.

Step-by-step explanation:

Due to the fact there are limited resources in the economy, as more of one product is being produced, there would be less resources available to produce the second good and as a result, the number of the other good that can be produced would reduce.

As more of one good is produced, the opportunity cost of producing the other good increases.

As more missiles are produced, less consumer goods would be produced and the opportunity cost of consumer goods would increase.

This can be understood by looking at the production possibility curve.

The Production possibilities frontiers is a curve that shows the various combination of two goods a company can produce when all its resources are fully utilised.

As more quantities of a product is produced, the fewer resources it has available to produce another good. As a result, less of the other product would be produced. So, the opportunity cost of producing a good increase as more and more of that good is produced

It is for this reason that the production possibility frontier is bowed outwards