Question

Consider a society that must choose between making automobiles and tractors. The quantity of automobiles produced is graphed on the vertical axis on the PPF. What happens to the opportunity cost of making tractors as society moves to the right and down the curve?A) The opportunity cost stays the same.
B) The opportunity cost decreases substantially.
C) The opportunity cost decreases slightly.
D) The opportunity cost increases

Answer 1

Answer:

The correct answer is option D.

Explanation:

A society is assumed to produce two goods, automobiles and tractors. Automobiles are represented on the vertical axis while tractors are represented on the horizontal axis.

As society moves to the right on the production possibility frontier the quantity of tractors increases. At the same time, as the production of automobiles is reduced, the cost of giving up automobiles increases. In other words, the opportunity cost of producing tractors increases.  

This happens because of substituting a resource for the production of another good.

Answer 2

Answer:

D) The opportunity cost increases

Explanation:

The law of increasing opportunity cost is the concept that as you continue to increase production of one good, the opportunity cost of producing that next unit increases. This comes about as you reallocate resources to produce one good that was better suited to produce the original good.