Question

• How do increasing opportunity costs affect the shape of the production possibilities curve? Provide an example that illustrates the concept of increasing opportunity costs. Include a graph or illustration to support your answer. Your response should be at least 75 words (1 paragraph) in length, plus the graph or illustration.

Answer 1

Opportunity cost is the quantity of another product which is foregone to produce one more quantity of a particular good. A typical production possibility curve has increasing opportunity cost as more and more of a product is produced. In other words, if you forego 2 units of Y to produce the 1st unit of X, you may be foregoing 3 units of Y to produce 2nd unit of X and so on. This results in production possibility curve sloping downwards and being concave. Pls see illustration below. Movement from B to D results in much more gain of butter than loss of guns, but as you produce more of butter, i.e., move from D to C, you get considerably less of butter and forego considerably more of guns.