The table above represents five points on the production possibility frontier for the small country of Baca, which produces only rugs (measured in thousands) and wheat (measured in thousands of bushels): Does the production possibility frontier
demonstrate the law of increasing opportunity cost? How can you tell?
Yes. The opportunity cost of increasing the production of wheat rises as more wheat is produced. The opportunity cost of the first 10,000 bushels of wheat is only 5,000 rugs, but the opportunity cost of the fourth 10,000 bushels of wheat is 20,000 rugs.
You might also like to view...
How does the real interest affect households' decisions about saving?
What will be an ideal response?
Markets in which the behavior of the firms theoretically leads to an efficient allocation of resources that maximizes the benefits to consumers given the resources available to consumers are
a. monopolistic competition and oligopoly. b. monopoly and oligopoly. c. monopolistic competition and monopoly. d. perfect competition and perfectly contestable.