Question

Which of the following describes the law of increasing opportunity cost?
As an economy chooses to produce more of one good; it gives up decreasing amounts of the other good
As an economy chooses to produce more of one good; it gives up the same amounts of the other good
As an economy chooses to produce more of one good, it gives up increasing amounts of the other good
None of the above

Answer 1

Answer:

The correct option is C) As an economy chooses to produce more of one good, it gives up increasing amounts of the other good.

Explanation:

The law of increasing opportunity costs states that: if we want to produce more of a particular good then we will have to sacrifice larger and larger amounts of another good to do so. As production increases, the opportunity cost also tends to increase. This happens because the resources available will not be enough to produce both the goods efficiently. Hence, when the production of one good increases, the production of the other good will decrease.