Refer to the following graphs.
In the early 1990s, mounds of newspapers and worthless plastic piled up at recycling centers. As the nation's economy continued to grow, increased demand eliminated the mounds and turned them into shortages. In the mid-1990s, as recycling became more popular, the mounds of recycled materials returned. What graph best depicts these events on the market for recycled materials?
A. Price remained constant at P0. Demand shifted from D0 to D1 and then back to D0.
B. Price remained constant at P0. Supply first shifted from S1 to S0 and then back to S1.
C. Price remained constant at P0. Demand shifted from D0 to D1 then supply shifted from S0 to S1.
D. Price remained constant at P0. Quantity demanded first rose, while supply remained constant; quantity supplied then rose, while demand remained constant.
Answer: C
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Suppose that a market basket of two goods is changed by adding more of one of the goods and subtracting one unit of the other. The consumer will:
A) rank the market basket more highly after the change. B) rank the market basket more highly before the change. C) rank the market basket just as desirable as before. D) any one of the above statements may be true.
Using your own words, describe the law of increasing opportunity costs. Be sure to explain why this phenomenon occurs and how it helps to contribute to the shape of the production possibilities frontier