Which statement describes increasing opportunity cost?

Which statement describes increasing opportunity cost?

• A. You give up the same amount of one good for each extra unit of another.
• B. You have to give up more of one thing to obtain one more unit of another.
• C. Costs stay constant as production changes.
• D. It refers to the monetary price you pay.

Answer: (B)

Increasing opportunity cost shows up when reallocating resources to make more of one good requires sacrificing increasingly larger amounts of another good. This happens because resources aren’t perfectly adaptable to every task—some inputs are better suited for one product than another. As you shift production toward more of one good, you begin using resources that are less efficient for that purpose, so each additional unit you produce costs you more of the other good. On a production possibilities frontier, this appears as a bowed-out curve: the trade-off becomes steeper as you move along, meaning you must give up more of the other good for each extra unit produced. The other phrasing describes constant opportunity cost—where you sacrifice the same amount of the other good per additional unit—or mixes up the idea with monetary price, which is not the same as the value of the next best alternative.

Increasing opportunity cost shows up when reallocating resources to make more of one good requires sacrificing increasingly larger amounts of another good. This happens because resources aren’t perfectly adaptable to every task—some inputs are better suited for one product than another. As you shift production toward more of one good, you begin using resources that are less efficient for that purpose, so each additional unit you produce costs you more of the other good.

On a production possibilities frontier, this appears as a bowed-out curve: the trade-off becomes steeper as you move along, meaning you must give up more of the other good for each extra unit produced.

The other phrasing describes constant opportunity cost—where you sacrifice the same amount of the other good per additional unit—or mixes up the idea with monetary price, which is not the same as the value of the next best alternative.